Chapter-5
MIS in functional areas of business
5.1 Accounting information systems
Accounting Information System refers to the computer-based method used
by the companies to collect, store and process the accounting and the
financial data, which the internal users of the company use to give a report
regarding various information to the stakeholders of the company, such as
creditors, investors, tax authorities, etc.
Components of Accounting Information System (AIS)
#1 – Person ( Stakeholders)
There is a stakeholder who feeds information into the system, collects,
analyses, reports, etc., and another person(stakeholder) needs information.
For example, an accountant records various financial data and presents
them for the use of multiple stakeholders like an owner, shareholders,
creditors, government, etc.
#2 – Data
It is all about various accounting transactions, events, and other
monetary items. AIS will not record any information which does not have
a monetary base. Data can be anything like sales ledger, customer
account, vendors ledgers, financial reports like P&L and Balance
sheet, cash flow statement, etc.
#3 – Established Procedures
As stated in the definition, AIS follows predefined steps and procedures to
perform various functions. Ensure consistency; this is one of the most basic
needs of an AIS. AIS may act either with manual intervention or
automatically. This action needs to be instructed to the person processing
data or coded in the system in case of automatic systems.
#4 – Software (ERP)
A software or, in broader terms, ERP is a computer-based program that
performs the stated functions. ERP is a database software package system
that supports business processes and operations, including manufacturing,
marketing, financial, human resources, etc. It forms one of the main
components of the Accounting Information System (AIS).
#5 – Information System Infrastructure
IT Infrastructure can be a consortium of various IT & IS hardware, tools,
and accessories. For example, computers, printers, scanners, etc.
#6 – Internal Controls
Internal controls are the basic need of every business organization.
These are tools, checks, procedures, systems adopted by an organization
to ensure the integrity of financial information, prevention of frauds,
errors, safeguarding of assets, etc.
Advantages of Accounting Information System
● #1 – Cost-Effectiveness. AIS has helped reduce manual efforts and can
perform the same operation more cost-effectively.
● #2 – Time Effectiveness – AIS has assisted business organizations in
reducing the amount of time involved in recording, classifying, and
reporting any financial information. AIS can complete a large quantum of
manual work with much less effort and time.
● #3 – Easy Access(Portability) – Data stored in AIS can be retrieved via
an information system connected to the internet anywhere and at any time.
Where manually prepared books of accounts cannot be carried easily, AIS
data can be.
● #4 – Accuracy – With the involvement of AIS, the reliability of data is
increased
Disadvantages
● #1 – Initial Cost of Installment and Training – While we discussed that
an AIS is cost-effective, the same may not be accurate in the case of small
business enterprises. The initial setup cost may be high and may not
generate value for the organization.
● #2 – Manual Intervention – Although we discussed that AIS reduces
manual intervention, the same cannot be eliminated. AIS needs manual
intervention at a certain point, which may bring inefficiency to the system.
● #3 – Error Cannot be Completely Eliminated – We discussed that AIS
reduces the chances of error, but there are chances of wrong coding in
software, which may lead to error-prone results. Also, manual intervention
is still present here, generating an error.
● #4 – Confidentiality – Although we discussed the portability of AIS data,
the same can also be disastrous for an organization If such information is
hacked, i.e., stolen. An intruder may amend the information or can disclose
sensitive financial information.
● #5 – Virus Attack – Any data stored on IS can be infected with a virus that
may disrupt and modify financial information stored on AIS.
5.2 Geographical information systems
A geographic information system (GIS) is a computer system for capturing,
storing, checking, and displaying data related to positions on Earth’s
surface. By relating seemingly unrelated data, GIS can help individuals and
organizations better understand spatial patterns and relationships.
Components of GIS system –
A GIS system can be viewed as an integration of three components:
hardware and software, data, people. Let's discuss them one by one:
Hardware and software –
Hardware relates to devices used by end users such as graphic devices or
plotters and scanners. Data storage and manipulation is done using a
range of processors. With the development of the Internet and Web based
applications, Web servers have become part of many system’s
architecture, hence most GIS follows 3-Tier architecture.
Software parts relate to the processes used to define, store and manipulate
the data and hence it is akin to DBMS. Different models are used to provide
efficient means of storage retrieval and manipulation of data.
Data –
Geographic data are basically divided into two main groups: vector and
raster.
1)Vector data/layers in GIS refers to discrete objects represented by
points, lines and polygons. Lines are formed by connecting two or more
points and polygons are a closed set of Lines. Layers represent geometries
that share a common set of attributes. Objects within a layer have mutual
topology. Vector sources include digitized maps, features extracted from
image surveys and many more.
2)Raster data is a continuous grid of cells in two dimensions or the
equivalent of cubic cells in three dimensions. Raster data are divided
conceptually into categorical and continuous. In a categorical raster every
cell value is linked to a category in a separate [Link] Soil type,
vegetation [Link] suitability, and so on. Continuous raster images
usually describe continuous phenomena in space such as the Digital
Elevation Model where each pixel is an elevation value. Unlike categorical
raster, a continuous raster doesn’t have an attribute/category table
attached. Typical Raster sources are aerial images, satellite images and
scanned map images.
People –
People are involved in all phases of development of a GIS system and in
collecting data. They include cartographers and surveyors who create the
maps and survey the land and the geographical features. They also include
system users who collect the data, upload the data to the system,
manipulate the system and analyze the results.
Advantages:
● It has the ability of improving organizational integration. GIS would
then integrate software, hardware and also data in order to
capture, analyze, manage and so display all forms of information
being geographically referenced.
● GIS would also allow viewing, questioning, understanding,
visualizing and interpreting the data into numbers of ways which
will reveal relationships, trends and patterns in the form of globes,
maps, charts and reports.
● Geographic Information System is to provide help in answering
questions as well as solve problems through looking at the data in
a way which is easily and quickly shared.
● GIS technology could also be integrated into the framework of any
enterprise information system.
Disadvantages
● GIS technology might be considered as expensive software.
● It as well requires enormous data inputs that are needed to be
practical for some other tasks and so the more data that is to put
in.
● Since the earth is round and so there would be geographic error
that will increase as you get to a larger scale.
● GIS layers might lead to some costly mistakes once the property
agents are to interpret the GIS map or the design of the engineer
around the utility lines of the GIS.
● There might be failures in initiating or initiating additional effort in
order to fully implement the GIS but there might be large benefits
to anticipate as well.
5.3 Human resource information systems
Human Resources Information Systems (HRIS) is an integration of HRM
and Information Systems (IS). HRIS or Human Resource Information
System helps HR managers perform HR functions in a more effective and
systematic way by using technology. A human resource information system
(HRIS) is a system used to acquire, store, manipulate, analyze, retrieve,
and distribute pertinent information about an organization’s human
resources.
HRIS has three basic components—input, storage, and output.
1. Input:
Input function provides the capabilities needed to enter data, relevant to
managing human resources, into the HRIS. Input function prescribes the
procedures for collecting data by whom, when, in what format, and from
what sources (internal and external).
2. Storage:
Storage function involves storing data in various files and updating data
from time to time to keep them up-to-date. Based on storage of data, output
in the form of information, relevant to action and decision making, is
prepared.
3. Output:
Output function of HRIS is most visible as it is directly relevant to users of
HRIS. In a computerized HRIS, output may appear in two forms- hard copy
printed on a piece of paper or soft copy visible on a computer screen.
Whatever form is selected, output is presented in a form which is easily
understandable and useful to users.
Advantages of HRIS
● It helps in smooth functioning of HR activities in an organization.
● It helps to resolve the queries of the employees by finding the solutions
at every point.
● HR audit is strongly supported by the HRIMS.
● People who are specialized in the IT sector can easily use it.
● It reduces the manual effort related to filing and paper documentation.
Disadvantages of HRIS
● Small organizations cannot implement it because it requires cost huge
cost
● Proper Information Technology system should be set up before
implementing this system.
● Many times the top management does not want to implement it because
it requires time to implement this process.
● Only Specialized HRIMS Teams can use it who have knowledge in this
domain area.
5.4 Inventory information systems
An inventory management system is the combination of technology
(hardware and software) and processes and procedures that oversee the
monitoring and maintenance of stocked products, whether those products
are company assets, raw materials and supplies, or finished products ready
to be sent to vendors or end consumers. A complete inventory
management system consists of:
● A system for identifying every inventory item and its associated
information, such as barcode labels or asset tags.
● Hardware tools for reading barcode labels, such as handheld barcode
scanners or smartphones with barcode scanning apps.
● Inventory management software, which provides a central database
and point of reference for all inventory, coupled with the ability to
analyze data, generate reports, forecast future demand, and more.
● Processes and policies for labeling, documentation, and reporting.
This should include an inventory management technique such as
Just in Time, ABC Analysis, First-In First-Out (FIFO), Stock Review,
or another proven methodology.
● People who trained to follow these policies and processes.
Inventory management system offers countless benefits to companies
including:
● Improved cash flow
● Better reporting and forecasting capabilities
● Reduction in storage costs (overhead)
● Reduced labor costs
● Reduction in dead stock
● Better organization
● Enhanced transparency
● Improved supplier, vendor, and partner relationships
5.5 Manufacturing information systems
Manufacturing information system is a system that supports the
manufacturing functions of purchasing, receiving, quality control, inventory
management, material requirements planning, capacity planning,
production scheduling, and plant design.
Generally, the primary decisions made in manufacturing include product
design, production, facility design, and quality control.
Sources of Manufacturing Information
• Product data. By using terminals around the production floor, data on
production processes can be quickly gathered and processed. These data
are used for billing and in almost every aspect of production control.
• Inventory data. It includes inventories of raw materials, goods –in-
process, and finished goods. Accurate raw material data are especially imp
in a manufacturing situation because running out of certain items at critical
times can shut down production lines, leaving workers idle.
• Vendor data. It shows sources and prices for raw materials. Often, it is
maintained by the purchasing department, although, sometimes the
manufacturing area will personally buy certain items. In any case,
manufacturing personnel must be constantly aware of the origination of
their raw materials, what new types of products are offered by vendors, and
current prices.
• Personnel data. It shows various statistics on current manufacturing
personnel.
• Union data. Many types of labor today are unionized production shops
that usually have strict regulations regarding such items as pay scales,
hiring and firing, promotion, and working conditions.
• Engineering specifications. It is the data indicating whether something can
be built and how. It contains such facts as the size of screws; whether a
certain drill bit is suitable for wood.
• Internal marketing data. It ends where manufacturing begins, so
marketing output is manufacturing input. Marketing specifies the number of
units of goods that must be produced in each time period in order to meet
consumer demand.
Advantages of Manufacturing Information System
Manufacturing goods & services is the main function of a business. The
information generated from the shop- floor drives the rest of the
organization. Hence, the firms that have wall –integrated manufacturing
information systems are bound to reap significant benefits.
5.6 Marketing information systems
The Marketing Information System refers to the systematic collection,
analysis, interpretation, storage and dissemination of the market
information, from both the internal and external sources, to the marketers
on a regular, continuous basis.
Components of Marketing Information System
1. Internal Records: The Company can collect information through its
internal records comprising of sales data, customer database, product
database, financial data, operations data, etc.
2. Marketing Intelligence System: The marketing intelligence system
provides the data about the happenings in the market, i.e. data related to
the marketing environment which is external to the organization.
3. Marketing Research: The Marketing Research is the systematic collection,
organization, analysis and interpretation of the primary or the secondary
data to find out the solutions to the marketing [Link] Companies
conduct marketing research to analyze the marketing environment
comprising of changes in the customer’s tastes and preferences,
competitor’s strategies, the scope of new product launch, etc. by applying
several statistical tools. In order to conduct the market research, the data is
to be collected that can be either primary data (the first-hand data) or the
secondary data (second-hand data, available in books, magazines,
research reports, journals, etc.)The secondary data are publicly available,
but the primary data is to be collected by the researcher through certain
methods such as questionnaires, personal interviews, surveys, seminars,
etc
4. Marketing Decision Support System: It includes several software
programs that can be used by the marketers to analyze the data, collected
so far, to take better marketing [Link] the use of computers, the
marking managers can save the huge data in a tabular form and can apply
statistical programs to analyze the data and make the decisions in line with
the findings.
Marketing Information System – Characteristics
1. MIS is an ongoing process. It operates continuously.
2. MIS acts as a data bank and facilitates prompt decision-making by
managers.
3. MIS operates in a rational and systematic manner and provides
required information.
4. MIS is future-oriented. It anticipates and prevents problems as well
as it solves marketing problems. It is both a preventive as well as
curative process in marketing.
5. The gathered data is processed with the help of operations
research techniques. Modern mathematical and statistical tools are
available for problem-solving in the field of marketing.
6. MIS is a computer-based method of data collection, processing,
and storage.
7. Management gets a steady flow of information on a regular basis
— the right information, for the right people, at the right time and cost.
Marketing Information System – Advantages and Disadvantages
Advantages of MIS:
1. Control Systems:
(a) Typical Applications:
(i) Control of marketing costs.
(ii) Diagnosis of poor performance.
(iii) Management of fashion goods.
(iv) Flexible promotion strategy.
(b) Benefits:
(i) More timely computer reports.
(ii) Flexible on-line retrieval of data.
(iii) Automatic spotting of problems and opportunities.
(iv) Cheaper, more detailed, and more frequent reports.
2. Research Systems:
(a) Typical Applications:
(i) Advertising strategy.
(ii) Pricing strategy.
(iii) Evaluation of advertising expenditures.
(iv) Continuous experiments.
(b) Benefits:
(i) Additional manipulation of data is possible when stored for computers in
an unaggregated file.
(ii) Improved storage and retrieval capability allows new types of data to be
collected and used.
(iii) Well-designed data banks permit integration and comparison of
different sets of data.
Disadvantages of MIS:
1. Expensive – Establishment of MIS is a costly affair as it involves huge
cost to be incurred on setting up of hardware and software for the required
purpose.
2. Not Preferred – The database marketing has been primarily used as a
tactical tool. There is a possibility that MIS leads to less reliable and less
secure data. MIS systems may become slow, large, and hard to manage.
3. Depends on Database – The database marketing depends on the data
quality. While the observational data is powerful, the corrupted
observational data could be ‘powerful misleading’. The quality also
depends on the quality of analysis and the extent to which the databases
are linked.
4. Requires New Set of Skills – The database often demands new skills
and organizations from new analytical and decision-making skills in sales
and marketing to a revamped information system organization that could
support the entirely new class of users.
5.7 Quality information systems
A Quality Information System (QIS) is an integrated set of activities that
provides timely, accurate, relevant, comprehensive, and reliable
information about the quality of products or services produced by
organizations. A QIS can provide decision support tools to help managers
make informed decisions about their operations
A QIS can provide decision support tools to help managers make informed
decisions about their operations. It also helps them identify areas where
they need improvement in order to meet customer expectations and
improve overall performance.
The Quality Information System consists of all those actions taken to
collect, analyze, interpret, and use quality-related information to manage
processes and systems so that they produce consistently high-quality
products or services. The term "information" refers to any type of
knowledge that has been acquired through experience or observation. This
includes both quantitative and qualitative aspects of product or service
characteristics. In addition to collecting and analyzing this information, it
should be used to develop strategies to improve the quality of the process
itself.
Features :
● Reliability
● Timely
● Relevant
● Accurate
● Sufficient
● Unambiguous
it should be comprehensive.
● Complete
● Unbiased
● Explicit
● Comparable
● Reproducible
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