Introduction to MIS1 Copyright © 1998 by Jerry Post INFSY540.1 Information Resources in Management Lesson #4 Chapter 9 Decisions in Business Areas.

Introduction to MIS 1

Copyright © 1998 by Jerry Post

INFSY540.1Information Resources in Management

Lesson #4

Chapter 9

Decisions in Business Areas

2

Decisions inFunctional Areas

Fin

ance

Mod

els

Acc

ount

ing

Mod

els

Pro

duct

ion

Mod

els

Mar

ketin

g M

odel

s

Hum

an R

esou

rce

Mod

els

Strategy

TacticalDecisions

Operations

Company

Decision Making and

Problem Solving

Herb Simon’s Model of Decision Making and Problem Solving

Decision Making and

Problem Solving

Intelligence

Design

Choice

Implementation

Monitoring

Herb Simon’s Model of Decision Making and Problem Solving

5

Programmed versus Nonprogrammed Decisions Programmed decisions

Structured situations with well defined relationships Quantifiable Management information system

Nonprogrammed decisions Ill-structured situations with vague or changing relationships

between variables Not easily quantifiable in advance Decision support systems

6

Problem Solving Approaches

An Overview of Management Information Systems

9

Figure 10.3

10

Figure 10.4

11

Characteristics of an MIS Fixed format, standard reports Hard-copy or soft-copy reports Uses internal data User-developed reports Users must request formal reports from IS department

12

13

Figure 10.7

14

Manufacturing MIS Inventory management (MRP, JIT) Process control

Computer-assisted manufacturing (CAM) Computer integrated manufacturing Flexible manufacturing system

Quality control

15

Figure 10.8

16

Figure 10.9

17

Computers are used to track inventory levels, receipts, and shipments. Sophisticated warehouse information systems automatically route boxes to storage and switch conveyor systems to send packages to trucks waiting at the loading docks.

Production Models Process Control Inventories, MRP Computer Integrated Manufacturing Product Design

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Integrated Manufacturing

shippingpackingproduction

rawmaterials

time

Q

forecast sales by product

production schedule

workers & materials

optimize schedule

Send EDInotices tosuppliers.

schedule changes

Information & Control

Suppliers

Customers

19

File: C09E05a.xls

Production

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Production Example Parameters

Number of backup machines Number of repair workers Mean time to failure Mean repair time Cost additional workers Cost of lost production

Output: Total costs

Objective: Hire the number of workers that leads to the least cost

21

Geographic Models

City 1980 pop 1990 pop 1980 per capita income1990 per capita income1980 hard sales1980 soft sales1990 hard sales1990 soft salesClewiston 5219 6085 7645 13598 452 562.5 367.6 525.4Fort Myers 36638 45206 6483 16890 535.2 652.9 928.2 1010.3Gainesville 81371 84770 6150 13672 365.2 281.7 550.5 459.4Jacksonville 540920 635230 6767 15316 990.2 849.1 1321.7 1109.3Miami 346865 258548 6084 16874 721.7 833.4 967.1 1280.6Ocala 37170 42045 6175 12027 359 321.7 486.2 407.3Orlando 128291 164693 6735 16958 425.7 509.2 691.5 803.5Perry 8254 7151 5727 11055 300.1 267.2 452.9 291Tallahassee 81548 124773 6310 14578 595.4 489.7 843.8 611.7Tampa 271523 280015 6441 15081 767.4 851 953.4 1009.1

File: C09GISa.xls

22

Tampa

Miami

Fort Myers

JacksonvilleTallahassee

Gainesville

Ocala

Orlando

Clewiston

Perry

7000+

6700

6400

6100

5800-

1980 1990

17,000

15,000

13,000

11,000

9,000

per capita income

Red

3.2

Yellow

2.3

Blue

1.9

Green

2.3

Red

1.7

Yellow

1.1

Blue

1.0

Green

1.1

Red

2.1

Yellow

1.7

Blue

1.1

Green

1.4

Red

5.0

Yellow

4.2

Blue

3.2

Green

3.7

Red

1.8

Yellow

1.5

Blue

1.2

Green

1.4

Red

2.6

Yellow

3.0

Blue

1.9

Green

1.6

Red

3.6

Yellow

3.8

Blue

3.2

Green

2.9

Red

3.5

Yellow

3.8

Blue

2.5

Green

2.0

Red

1.4

Yellow

2.0

Blue

2.1

Green

1.7

Red

3.7

Yellow

4.8

Blue

3.2

Green

2.7

1990HardGoods

1990SoftGoods

1980HardGoods

1980SoftGoods

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Accounting

Because of the volume of data, accountants are primary users of information systems. Spreadsheets are used to evaluate the financial condition of the firm and help make decisions.

24

Accounting Models Transaction Processing & Tactics

Accounting systems are models Standards for reports Decisions & Data

Control Systems Accuracy Fraud

Strategic Support Information Customization

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Traditional Cost Accounting

File: C09E01a.xls

Activity Based Costing

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Activity Based Costing

Process SalesOrders

SourceParts

ExpediteSupplierOrders

ExpediteInternal

Processing

ResolveSupplierQuality

ReissuePurchase

Orders

ExpediteCustomer

Orders

ScheduleIntracompany

Sales

RequestEngineering

Change

ScheduleParts

ResolveProblems

Process DiagramIdentify Subsystems

Assign costs to each subprocess by category (salaries, fixed costs . . .)

27

Financial Markets

Information is the essence of a financial market. Its purpose is to bring buyers and sellers together. With thousands of investments and millions of buyers and sellers, brokers are surrounded by data. The problem lies in analyzing and evaluating this data.

28

Finance

Balance Sheet for 1999

Cash 33,562 Accounts Payable 32,872 Receivables 87,341 Notes Payable 54,327 Inventories 15,983 Accruals 11,764 Total Current Assets 136,886 Total Current Liabilities 98,963

Bonds 14,982 Common Stock 57,864

Net Fixed Assets 45,673 Ret. Earnings 10,750 Total Assets 182,559 Liabs. + Equity 182,559

File: C09E02a.xls

29

FinanceIncome Statement for 1999

Sales $97,655 tax rate 1993 40%Operating Costs 76,530 dividends 1993 60%Earnings before interest & tax 21,125 shares out. 1993 9763

Interest 4,053 Earnings before tax 17,072 taxes 6,829 Net Income 10,243

Dividends 6,146 Add. to Retained Earnings 4,097

Earnings per share $0.42

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Corporate Finance

Results in a CIRCular calculation.

Cash $36,918Acts Receivable 96,075Inventories 17,581

Net Fixed Assets 45,673

Total Assets $196,248

Accts Payable $36,159Notes Payabale 54,327Accruals 12,940

Total Cur. Liabs. 103,427

Bonds 14,982Common Stock 57,864Ret. Earnings 14,915

Liabs + Equity 191,188

Add. Funds Need 5,060

Bond int. rate 5%

Added interest 253

Balance Sheet projected 2000Income Statement projected 2000

Sales $ 107,421Operating Costs 84,183

Earn. before int. & tax 23,238Interest 4,306

Earn. before tax 18,931taxes 8,519

Net Income 10,412

Dividends 6,274

Add. to Ret. Earnings $ 4,165

Earnings per share $0.43

Tax rate 45%Dividend rate 60%Shares outstanding 9763

Sales increase 10%Operations cost increase 10%

Forecast sales and costs.

Forecast cash, accts receivable, accts payable, accruals.

Add gain in retained earnings.

Compute funds needed and interest cost.

Add new interest to income statement.

1

2

3

4

5

12

4

2

3

5Total Cur. Assets 150,576

31

Marketing decisions often entail determining customer preferences. Interviews and data collection are an important first step. Analyzing conflicting data is a challenge that often requires sophisticated decision support tools.

Marketing

32

Government Census

Income Demographics Regional data

Government Legal registration

Drivers license Marriage Housing/construction Business/legal notices

Marketing Data Sources Internal

Sales Warranty cards Customer service Coupons Surveys Focus groups

Purchase Scanner data Competitve market analysis Mailing & phone lists Subscriber lists Rating services Shipping records

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Marketing

Research and Forecasting

Customer Service

File: C09E03a.xls

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Promotion Analysis

Regression ResultsWith no promotions:

sales = 20,865 + 342 * consumer + 339 * weekconsumer survey average = 45

Promotion 1:

sales = 42,370 - 62 * consumer - 211 * weekconsumer survey average = 47

Promotion 2:

sales = 13,448 + 501 * consumer + 545 * weekconsumer survey average = 53

Promotion 3:

sales = 44,808 + 98 * consumer - 2067 * weekconsumer survey average = 38

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-10000

0

10000

20000

30000

40000

50000

60000

$ sa

les

1 3 5 7 9 11 13 15 17 19 21 23 week

No promo promo1 promo2 promo3

InchikiPromotion Options

Promotion Results Graph

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Figure 10.11

37

Figure 10.12

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Human ResourcesFile: C09E04a.xls

39

Raises

0500

1000

1500200025003000

35004000

Caulkins Jihong Louganis Naber Spitz Weissm uller

dolla

rs

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%

Raise Raise pct Performance

Human Resources

40

Appendix: Financial Ratios Goals

Highlight relationships among financial accounts

Compare firms within industries

Categories Profitability Liquidity Activity Leverage (debt)

DuPont Analysis Margin versus Quantity

41

Profitability Ratios

salesNettaxes before income Net

= margin Profit

goutstandin sharesof Numberdividends + taxes after income Net

= (EPS) shareper Earnings

value) (bookEquity taxes after income Net

= (ROE)equity on Return

EPS shareper price market Average

= E)(P ratio earnings Price /

Higher is better. Except a high P/E ratio might indicate that a stock is overpriced in the market.

42

Liquidity Ratios

sliabilitie Currentassets Current

= ratio Current

sliabilitie CurrentsInventorie - assets Current

= test Acid) (or Quick

Higher is better. Except too high implies excess cash on hand--which should be invested.

43

Activity Ratios

assets Total salesNet

= turnover Asset

Inventory soldgoods of Cost

= turnoverInventory

day per Salesreceivable Accounts

= period collection Average

Low implies excess capacity or poor sales.

Low implies poor inventory management or weak sales.

Low implies poor management of collections.

44

Leverage Ratios

assets Totaldebt Total

= ratio Debt

charges Interestcharges Interest + taxes before Income

= earned interest Times

Low implies problems with covering debt payments.

Highly variable, depending on management and industry.

45

DuPont Analysis

equity Commonassets Total

x assets Total

income Net

Leverage x ROA

= ROE

ROA =

Profit margin x Total asset turnover

Net income

Sales x

Sales

Total assets

Choice: sell at high profit margin, or high volume.