Management Information Systems Unit 7 Sikkim Manipal University 97 Unit – 7 MIS Organization Structure Structure 7.1 Introduction 7.2 MIS at Management levels 7.3 Strategic Level Planning 7.4 Operational Level Planning 7.5 Economic and Behavior Theories 7.5.1 Build and Use 7.5.2 MIS for Competitive Advantage 7.6 Enterprise Resource Planning 7.6.1 Perception of ERP 7.6.2 ERP – Before and After 7.6.3 Best Practices 7.6.4 Implementation 7.6.5 Process Preparation 7.6.6 Configuration 7.6.7 Consulting Services 7.6.8 Customization Services 7.6.9 Maintenance and Support Services 7.6.10 Advantages and Disadvantages 7.6.11 Limitations of ERP 7.6.12 ERP integration 7.7 Summary TQs Answer to SAQs to TQs 7.1 Introduction ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes of an organization into one single system. Usually ERP systems will have many components including
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Management Information Systems Unit 7
Sikkim Manipal University 97
Unit – 7 MIS Organization Structure
Structure
7.1 Introduction
7.2 MIS at Management levels
7.3 Strategic Level Planning
7.4 Operational Level Planning
7.5 Economic and Behavior Theories
7.5.1 Build and Use
7.5.2 MIS for Competitive Advantage
7.6 Enterprise Resource Planning
7.6.1 Perception of ERP
7.6.2 ERP – Before and After
7.6.3 Best Practices
7.6.4 Implementation
7.6.5 Process Preparation
7.6.6 Configuration
7.6.7 Consulting Services
7.6.8 Customization Services
7.6.9 Maintenance and Support Services
7.6.10 Advantages and Disadvantages
7.6.11 Limitations of ERP
7.6.12 ERP integration
7.7 Summary
TQs
Answer to SAQs to TQs
7.1 Introduction
ERP stands for Enterprise Resource Planning. ERP is a way to integrate the data and processes of
an organization into one single system. Usually ERP systems will have many components including
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hardware and software, in order to achieve integration, most ERP systems use a unified database to
store data for various functions found throughout the organization.
The term ERP originally referred to how a large organization planned to use organizational wide
resources. In the past, ERP systems were used in larger more industrial types of companies.
However, the use of ERP has changed and is extremely comprehensive, today the term can refer to
any type of company, no matter what industry it falls in. In fact, ERP systems are used in almost any
type of organization large or small. In order for a software system to be considered ERP, it must
provide an organization with functionality for two or more systems. While some ERP packages exist
that only cover two functions for an organization, most ERP systems cover several functions.
Today's ERP systems can cover a wide range of functions and integrate them into one unified
database. For instance, functions such as Human Resources, Supply Chain Management, Customer
Relations Management, Financials, Manufacturing functions and Warehouse Management functions
were all once stand alone software applications, usually housed with their own database and
network, today, they can all fit under one umbrella the ERP system.
Learning Objectives
After going through this unit Students will be able to learn the following concepts regarding :
• Management Level planning of MIS
• How to gain the competitive advantage from MIS
• Enterprise resource planning.
• Understand the best practices, consultancy services and its
• Advantages and disadvantage
7.2 MIS at Management levels
Planning
Decision made about what task has to be done, when it has to be done, by whom and how it has to
be done is called as planning. The first step involved in planning is analysis. The goals have to be
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targeted has to be identified and the various resources available have to be taken into account. The
interest of various groups, associated with the organization, has to be considered. The groups can be
stakeholders and directors, employees, management, customers, suppliers, Government and public.
The process of business planning can be broadly classified as strategic level and operational level.
Self Assessment Questions1:True or False 1. The term ERP originally referred to how a large organization planned to use organizational wide
resources. 2. Management functions were all once stand alone software applications, usually housed with their
own database and network, today, they can all fit under one umbrella the ERP system.
3. The process of business planning can be broadly classified as strategic level.
7.3 Strategic level planning This planning is adopted by the top level executives in the organization. They decide on the goals to
be targeted and the different strategies to be adopted by the organization. They include plans to
acquire resources, to diversify, research and development, manufacturing a new product, sales and
marketing, setting up the infrastructure and human resource planning.
Different steps in strategic planning are:
• Analyzing the business environment
• Analyzing the available resources
• Perspective of top management and groups concerned
• Identify the advantages and disadvantages
• Identify the market demand
• Evaluate the competitive strength
• Establish goals and strategies
• Efficient acquisition of required resources
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7.4 Operational level Planning The operational planning decides on the investment and the cost control. The main objective is
always to maximize the profit and to minimize the cost. The investment and financial controls are
established. They include managing the inventory, the cash flow, fixed assets etc. Proper budget has
to be allocated to labour, transportation, advertising and other overheads.
Costing and pricing of products is also an important aspect of operational planning. The cost of the
products is identified by taking into account the cost involved in production and marketing. The prices
of the products, is fixed considering the cost and the market demand. It also depends on customer is
a buyer or a seller.
An organization is a structure which takes in capital, raw materials, manpower, machines etc as
input. The inputs are processed and produces output in the form of different products and services.
They are also comprised of their own rules, regulations, policies and procedures to be followed.
Self Assessment Questions2 Fill in the blanks
1. The operational planning decides on the ______and the cost _______ . 2. ______ and ________ of products is also an important aspect of operational planning.
7.5 Economic and the Behavior Theories
Economic theory With growing economy and reduction of cost of information technology, it has
become more feasible to replace the manpower like middle managers and clerical workers with
information technology. This also reduces the space required. The transaction costs like searching
for the suppliers and vendors, communicating with them on a daily basis, monitoring the workflow,
tax and insurances, getting information of various products and their sales etc have reduced. The
management costs are reduced and the efficiency increased due to the use of information
technology and thus the revenues of the organization increases.
Behaviour theory The acquisition of information and the distribution of information is done easily at
a much lower cost. The senor executives can be in direct contact with the lower level working units
and get information about the working. Similarly, any information to the distributed to the working
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units is also done directly, without any middle managers or supervisors. The outcome of the
introduction of information technology is the change in the organizational structure, policies and
procedures. When introduced, it may face a lot of resistance.
7.5.1 Build and Use Managers need to understand certain essential features of organizations in order to build and use
information systems successfully. All modern organizations are hierarchical, specialized and
impartial. They use explicit standard operating procedures to maximize efficiency. All organizations
have their own cultures and policies arising from differences in interest groups. Organizations differ in
goals, grouped served, social roles, leadership styles, incentives, surrounding environments and
types of tasks performed. These differences create varying types of organizational structures and
they also help explain differences in organizations’ use of information systems.
What impact do information systems have on organization?
Information systems and the organizations in which they are used interact with and influence each
other. The introduction of a new information system will affect organizational structure, goals, work
design, values, competition between interest groups, decision making, and daytoday behaviour. At
the same time, information systems must be designed to serve the needs of important organizational
groups and will be shaped by the organizations’ structure, tasks, goals, culture, politics and
management. Information technology can reduce transaction and agency costs and such changes
have been accentuated in organizations using the internet. The information systems department is
the formal organizational unit that is responsible for the organizations’ information systems function.
Organizational characteristics and managerial decisions determine the role this group will actually
play.
How do information systems support the activities of managers in organizations?
There are several different models of what managers actually do in organizations that show how
information systems can be used for managerial support. Early classical models of managerial
activities stressed the functions of planning, organizing, coordinating, deciding and controlling.
Contemporary research looking at the actual behaviour of managers has found that managers’ real
activities are highly fragmented, variegated and brief in duration, with managers moving rapidly and
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intensely from one issue to another. Managers spend considerable time pursuing personal agendas
and goals and contemporary managers shy away from making grand, sweeping policy decisions.
The nature and level of decision making are important factors in building information systems for
managers. Decisions can be structured, semistructured or unstructured, with structured decisions
clustering at the operational levels of the organization and unstructured decisions at the strategic
planning level. Decision making can also take place at individual level or at the group level. Individual
models of decision making assume that human beings can rationally choose alternatives and
consequences based on the priority of their objectives and goals. Organizational models of decision
making illustrate that real decision making in organizations take place in ares where many
psychological, political and bureaucratic forces are at work.
Information systems have been most useful to managers by providing support for their roles in
disseminating information, providing liaison between organizational levels and allocating resources.
However, some managerial roles cannot be supported by information systems and information
systems are less successful at supporting unstructured decisions.
7.5.2 MIS for Competitive Advantage How can businesses use management information systems for competitive advantage?
Businesses can use strategic information systems to gain an edge over competitors. Such systems
change organizations’ goals, business processes, products, services or environmental relationships,
driving them into new forms of behaviour.
Information systems can be used to support strategy at the business, firm and industry level. At the
business level of strategy, information systems can be used to help firms become the lowcost
producers, differentiate products and services, or serve new markets. Information systems can also
be used to “lock in” customers and suppliers using efficient customer response and supply chain
management applications. Value chain analysis is useful at he business level to highlight specific
activities in the business where information systems are most likely to have a strategic impact.
At the firm level, information systems can be used to achieve new efficiencies or to enhance services
by tying together the operations of disparate business units so that they can function as a whole or
promoting the sharing of knowledge across business units. At the industry level, systems can provide
competitive advantage by facilitating cooperation with other firms in the industry, creating
consortiums or communities for sharing information, exchanging transactions, or coordinating
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activities. The competitive forces model, information partnerships, and network economics are useful
concepts for identifying strategic opportunities for systems at the industry level.
Why is it so difficult to build successful information systems including systems that promote
competitive advantage?
Information systems are closely intertwined with an organizations structure, culture and business
processes. New systems disrupt established patterns of work and power relationships, so there is
often considerable resistance to them when they are introduced.
Implementing strategic systems often requires extensive organizational change and a transition from
one sociotechnical level to another. Such changes are called strategic transitions and are often
difficult and painful to achieve. Not all strategic systems are profitable, and they can be expensive to
build. Many strategic information systems are easily copied by other firms, so that strategic
advantage is not always sustainable.
Self Asssessment Questions3 : True or False 1. The management costs are reduced and the efficiency increased due to the use of information
technology and thus the revenues of the organization increases.
2. Information systems can be used to support strategy at the business, firm and industry level.
3. Implementing strategic systems often requires extensive organizational change and a transition
from one sociotechnical level to another, which is known as operations transitions..
7.6 Enterprise Resource Planning
Manufacturing management systems have evolved in stages over the few decades from a simple
means of calculating materials requirements to the automation of an entire enterprise. Around 1980,
overfrequent changes in sales forecasts, entailing continual readjustments in production, as well as
the unsuitability of the parameters fixed by the system, led MRP (Material Requirement Planning) to
evolve into a new concept : Manufacturing Resource Planning (or MRP2) and finally the generic
concept Enterprise Resource Planning (ERP)
The initials ERP originated as an extension of MRP (material requirements planning then
manufacturing resource planning). ERP systems now attempt to cover all basic functions of an
enterprise, regardless of the organization's business or charter. Nonmanufacturing businesses, non
profit organizations and governments now all utilize ERP systems.
To be considered an ERP system, a software package must provide the function of at least two
systems. For example, a software package that provides both payroll and accounting functions could
technically be considered an ERP software package.
However, the term is typically reserved for larger, more broadly based applications. The introduction
of an ERP system to replace two or more independent applications eliminates the need for external
interfaces previously required between systems, and provides additional benefits that range from
standardization and lower maintenance to easier and/or greater reporting capabilities .
Examples of modules in an ERP which formerly would have been standalone applications include:
Manufacturing, Supply Chain, Financials, Customer Relationship Management (CRM), Human
Resources, Warehouse Management and Decision Support System.
7.6.1 Perception of ERP
Some organizations — typically those with sufficient inhouse IT skills to integrate multiple software
products — choose to implement only portions of an ERP system and develop an external interface
to other ERP or standalone systems for their other application needs. For example, one may choose
to use the HRMS from one vendor, and the financials systems from another, and perform the
integration between the systems themselves.
This is very common in the retail sector, where even a midsized retailer will have a discrete Point ofSale (POS) product and financials application, then a series of specialized applications to handle
business requirements such as warehouse management, staff rostering, merchandising and
logistics.
Ideally, ERP delivers a single database that contains all data for the software modules, which would