Types of Information Systems

Organizations typically incorporate new and emerging tools into their existing IT systems. Most managers appreciate the value of making information readily available and easily shared with those who need it in some kind of formal, computer-based information  sys- tem. Such a system combines hardware, software, and human resources to support organi- zational information and communication needs. One way to distinguish among the many types of information systems is to focus on the functions they perform and the people they serve in an organization. Operations information systems support  information- processing needs of a business’s day-to-day operations, as well  as low-level operations man- agement  functions. Management  information systems  typically support the strategic decision-making needs of higher-level managers.

1. OPERATIONS INFORMATION SYSTEMS

A variety of tools referred to as operations information  systems support the information- processing needs related to a business’s day-to-day operations. Types of operations’ infor- mation  systems include transaction-processing systems, process control systems, and office automation  systems. Each of these supports daily operations and decisions that typically are made by nonmanagement employees or lower-level managers.

Transaction-processing systems (TPSs) record and process data resulting  from business operations, including  such data as sales to customers, purchases from suppliers, inventory  changes, and wages to employees. A TPS collects data from these transactions and stores them in a database. Employees  use the database to produce reports and other information,  such as customer statements and employee paychecks. Most of an organiza- tion’s reports are generated from these databases. Transaction-processing systems identify, collect, and organize the fundamental information  from which an organization operates.

While a transaction-processing system keeps track of the size, type, and financial conse- quences of the organization’s  transactions,  companies also need information about the quantity and quality of their production activities. Therefore, they may use process control systems to monitor and control ongoing physical processes. For example, petroleum refin- eries, pulp and paper mills, food manufacturing  plants, and electric power plants use process control  systems with special sensing devices that monitor and record physical phenomena such as temperature or pressure changes. The system relays the measurements or sensor-detected data to a computer  for processing; employees and operations managers can check the data to look for problems requiring action.

Office  automation  systems combine  modern  hardware  and software  such  as word processors, desktop publishers, e-mail,  and teleconferencing to handle the tasks of publishing and distributing information. Office automation systems can also use data from  other  opera- tions systems to transform  manual accounting procedures to electronic media or to automati- cally make programmed decisions, as described earlier in this chapter. Some banks, for exam- ple, use automated systems to make credit decisions. Cellular phone companies use automation to determine the best service package for a particular  customer.96   Merrill Lynch uses office automation to electronically manage consultants’ travel and entertainment  expenses, cutting the time it takes to process a report  and issue reimbursement  from six weeks to four days and slashing the average cost of processing a report from  $25 to only a few bucks.97 These systems enable businesses to streamline office tasks, reduce errors, and improve customer service. In this way, office automation systems support the other kinds of information systems.

Operations information systems aid organizational  decision makers in many  ways and across various settings. For example, Enterprise Rent-A-Car’s Automated Rental Manage- ment System (ARMS) provides front-line employees with up-to-the-minute information that enables them to provide exceptional service to each customer. ARMS helps Enterprise keep track of the millions of transactions the company logs every hour. If a customer  visits a branch  office  and requests a certain  kind of car, the agent can immediately determine whether one is available anywhere in the city. Insurance  companies such as Geico  can also link their claims systems directly  to Enterprise’s automated rental system, book a reservation, and send payments electronically, eliminating  the need for paper invoices and checks.98

2. MANAGEMENT  INFORMATION SYSTEMS

A management information system (MIS) is a computer-based system that provides information and support for effective managerial decision making. The basic elements of a management information  system are illustrated  in Exhibit 6.9. The MIS is supported by the organization’s operations information systems and by organizational databases (and frequently  databases of external  data  as well). Management information systems typically include reporting systems, decision  support systems, executive  information systems,  and groupware,   each  of which will  be  explained   in  this section.

Miss typically support strategic decision-making needs of mid-level and top management.  However,   as technology  becomes more widely accessible, more  employees are wired into networks, and organizations push decision making downward.

Source: Daft Richard L., Marcic Dorothy (2009), Understanding Management, South-Western College Pub; 8th edition.