Types of Management Information Systems in Business

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Introduction

Businesses are characterized with several processes that lead to delivery of specific products for a given market. Some of the most common business processes include accounting, manufacturing, human resource management, sales, and marketing. Executing each of these processes requires accurate information that is used to make decisions.

Given the large volume of information generated by various business processes, companies have to invest in management information systems in order to improve their efficiency and competitiveness.

This involves acquiring “a computer-based system that provides managers with the tools to organize, evaluate, and efficiently manage departments within organizations”. This paper will discuss the various types of management information systems that are used by businesses.

Transaction Process System (TPS)

A TPS is an information management system that is used by businesses to collect, process, store, and retrieve transaction data. Generally, a TPS is used to process the data that is required to update the records about the operations of a business.

It supports the routine business activities, which enable firms to improve the value of their products or services. For instance, most companies use a TPS to conduct activities such as order entry, payroll processing, and inventory control. A TPS that leads to value addition contributes to the success of the organization.

An effective TPS should accomplish the following objectives. First, it should process the data used in transactions or generated by transactions such as selling products, processing orders, and billing customers. Second, a TPS should enhance the degree of accuracy and integrity of the data used in transactions to avoid losses.

Third, a TPS is expected to produce relevant reports in time to enable managers to make timely decisions. Finally, a TPS is expected to improve labor efficiency and service provision by automating various transactions. A TPS that achieves these objectives enables the company to improve its competitive advantage through value addition.

Management Information System (MIS)

MIS can be understood by defining its three components separately. Management refers to the process of initiating, planning, organizing and controlling the operations of a business. Information refers to data that has been processed or analyzed. A system refers to the various components of a business that function together to achieve a common objective.

In this context, MIS simply refers to a system that facilitates effective management of a business through appropriate use of information. All the components of MIS must run concurrently in order to improve the system’s efficiency.

The roles of management information system include the following. First, MIS enables managers to make appropriate decisions by providing timely and accurate information. It also provides tools that enable managers to analyze situations before making decisions. Second, MIS provides real-time updates of the activities that are taking place in the company.

Consequently, it enables managers to identify imminent crises and to take appropriate remedial actions. Third, management information systems ensure security and accountability because they are able to perform routine checks to identify any inconsistencies in business processes.

Finally, MIS facilitates safe and cost-effective keeping of business records. Given these benefits, a company must have a good MIS to enable its managers to make appropriate decisions.

Decision Support System (DSS)

DSS refers to an “interactive computer-based system that enables decision makers to use communication technologies, data, documents, knowledge, and models to identify and solve problems, as well as, to make decisions”. There are five types of DSS namely, model-driven, data-driven, communication-driven, document-driven, and knowledge-driven decision support systems.

A model-driven DSS uses simulation models to facilitate functions such as financial, production, and sales/ marketing analyses. It utilizes specific data and the parameters specified by managers to analyze various situations. A data-driven DSS facilitates access to and processing of the company’s historical data, as well as, real time data obtained from external sources.

Communication-driven DSS uses communication technologies such as video conferencing to enable managers to collaborate in the decision-making process through effective communication.

A document-driven DSS utilizes large databases and information processing technologies to enable managers to access and use information such as product specifications when making decisions. A Knowledge-driven DSS has specialized problem solving-capabilities that enable it to recommend solutions to managers.

The main objective of a DSS is to improve the process of making decisions at various levels of management by providing advanced analytical tools and accurate information. In order to achieve this objective, a typical DSS consists of multi-dimensional analytical tools, query tools, and data mining tools.

Query tools enable decision makers to access data from the system. Data mining tools facilitate automatic determination of correlations in the data. Multi-dimensional analytical tools enable managers to perform different analyses in order to arrive at the appropriate decision.

Executive Support Systems (ESS)

An ESS is a tool that enables businesses to organize their internal information, as well as, external information into useful reports. It consists of both computer hardware and software that facilitate data entry, data processing, and retrieval of information. Managers at the executive level often use ESS to monitor their companies and to make appropriate decisions.

In this regard, executive support systems facilitate access to information concerning the activities of various departments such as accounting and billing. Furthermore, most ESS have inbuilt analytical tools that enable executives to evaluate and predict various performance outcomes using the available data.

Generally, executive support systems are intelligence-based. They provide executives with intelligence concerning market dynamics, investments, and other internal or external factors that must be considered when making management decisions.

The benefits of ESS include effective and accurate analysis of general trends in the industry. This facilitates formulation of strategic plans by managers. Executive support systems also improve managers’ leadership capabilities by providing them with analytical tools that help in business performance evaluation.

Despite these benefits, an ESS can lead to information overload, which in turn slows decision-making processes. Consequently, it is prudent to analyze the information needs of the executives and the business in general in order to select the most appropriate ESS.

Customer Relationship Management Systems (CRMS)

Customer relationship management refers to “the processes or methodologies that a business uses to study and learn more about its customers’ needs in order to develop long-lasting relationships with them”. Thus, a CRMS is a system that facilitates interactions between the company and its customers.

CRMS is often used to perform activities such as optimizing sales management, identifying the target market, sharing information among departments, and identifying customers’ needs. CRMS can be implemented as a web-based software or a specialized software that is installed on the company’s computers.

CRMS has the following advantages. First, it enables companies to improve their customer services, which in turn improves the level of customer satisfaction and loyalty. Second, CRMS reduces the cost of acquiring new customers since it readily provides data concerning the customers. This eliminates the costs associated with acquiring information through methods such as marketing research.

Third, CRMS improves internal efficiency by facilitating quick access to the information that is required to make decisions. These benefits show that an effective CRMS can enable a company to overcome competition by attracting and retaining new customers. This leads to expansion of market share and improved financial performance.

Supply Chain Management (SCM)

A SCM system is a tool that enables companies to manage their relationships with their suppliers in order to maximize customer value. Supply chain activities include order processing, production, inventory control, and delivery of products or services. Performing these activities requires effective sharing of information among the departments that are directly involved in the supply chain.

Additionally, supply chain management requires effective coordination between the organizations that are involved in the supply chain. Thus, a SCM system has to be an inter-organizational system that facilitates automatic sharing of information among the organizations in the supply chain.

Additionally, an effective SCM system should accommodate the business models of potential partners or suppliers. This can be achieved through systems that can be modified to facilitate coordination of the activities of the companies in the supply chain.

The benefits of a SCM system include effective planning and execution of supply chain activities. This leads to timely delivery of inventory and products to the right destinations, thereby eliminating the costs associated with delays.

An effective SCM system also enables companies to reduce the risks associated with external factors such as political unrest. This is achieved through effective planning for raw materials and stocks of completed goods in order to prevent shortages.

Knowledge Management System (KMS)

A KMS is a computer-based system that supports the process of creating, storing, and sharing information within an organization. A typical KMS consists of a centralized database with advanced search tools that facilitate storage and retrieval of information. The aim of knowledge management systems is to collect the knowledge and experiences generated within an organization and make them available to employees.

Knowledge management systems also facilitate collaboration among employees who regularly perform knowledge-intensive tasks such as product development. In the contemporary society, companies have become repositories of the knowledge required to perform various business processes such as marketing.

Thus, having an efficient knowledge management system enables organizations to improve the performance of their employees by enabling them to access the knowledge they require to perform their duties.

Enterprise Applications (EA)

An enterprise application is a system that consists of several software packages with shared business applications. Thus, they tend to be complex, multi-dimensional, and scalable in order to respond to changing business information needs. An enterprise application is designed to integrate all the systems that are used to run an organization.

In particular, it ensures that various systems such as TPS, SCMS, and DSS are able to work concomitantly in order to improve the performance of the business. The application of EAs spans functional areas since they are often used to execute different business processes across the company. Additionally, EAs are used by all levels of management to access information and to make decisions.

The systems that are used to run a company share the data generated by different departments. In addition, employees and managers have to use different systems in order to complete various tasks.

This suggests that all the systems used in the company should be integrated through an effective enterprise application in order to ensure efficient and consistent flow of work. In addition, coordinating the functions of all the systems helps in improving the performance of the company by eliminating the costs associated with operating each system on its own.

Conclusion

Virtually all companies need accurate information to perform their business processes. Managers have to make decisions that led to successful completion of every stage of various business processes. Thus, businesses have to invest in systems that facilitate efficient and effective management of information, which in turn improves the process of making decisions.

This leads to achievement of improved competitive advantages since management decisions determine the outcome of business processes. In this regard, all companies require effective management information systems to enhance their operations.

References

Abramowicz, W., & Mayr, C. H. (2007). Technologies for business information systems. New York, NY: Springer.

Curtis, G., & Cobham, D. (2008). Business information systems: Analysis, design and practice. New York, NY: McGraw-Hill.

Gupta, H. (2011). Management information system. New Delhi, India: International Book House.

Naranjo, D. (2010). Managerial styles and management information systems for improving organizational performance. Journal of Positive Management, 1(1), 3-10.

Nowduri, S. (2011). Management information systems and business decision making: Review, analysis, and recommendations. Journal of Management and Marketing Research, 3(1), 1-7.

Wigand, R., Mertens, P., & Bodendorf, F. (2003). Introduction to business information systems. New York, NY: Springer.

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