CLASSIFICATIONS OF INFORMATION SYSTEMS

    

3.9. CLASSIFICATIONS OF INFORMATION SYSTEMS

Today an increasing number of managers rely on computers and information system to make decisions. Managers at different levels in an organization make different kinds of decisions (operational, tactical and strategic), so that the kinds of information necessary to support their decisions are also different. Accordingly, different types of information system are designed to meet the various information needs of managers. Information system performs important operational and managerial support roles in business and other organizations. Therefore, several types of information system can be classified conceptually as either operations or management support system. Figure illustrates this classification of information system.


  1. OPERATION SUPPORT SYSTEM

Information systems have always been needed to process data generated by and used in business operations. Such operations support system (OSS) produces a variety of information products for internal and external use. However, they do not emphasize producing the specific information products that can be used by managers. Further processing by management support system is usually required. The role of a business firm’s operations support system is to –

  • Efficiently process business transactions
  • Control industrial process
  • Support office communications and productivity, and
  • Update corporate database

3.9.1.1. Transaction Processing System

A transaction processing system is a computerized system that performs, records and processes the daily routine internal and external transaction in an organization. Their primary purpose is to record, process, validate, and store transactions that place in the various functional areas of a business for further retrieval and use.


According to Laudon and Laudon,

“Transaction processing system is a computerized system that performs and records the daily routine transaction necessary to conduct the business; they serve the operational level of the organization.”

Example: McDonald’s, which sells a large number of hamburgers every day, orders raw materials from its suppliers. Each time the company places an order with a supplier, a transaction occurs and a transaction system records relevant information, such as the supplier’s name, address, and credit rating, the kind of quantity of items purchased, and the invoice amount. Transaction processing system processes these data and the result of such processing are used to update customer, inventory, and other organizational databases.

Transaction can be internal and external and transaction processing system produces a variety of information products for internal and external use. When a department orders office supplies from the purchasing department, an internal transaction occurs; when a customer places an order for a product, an external transaction occurs.

Transaction processing systems process transaction in two basic ways. In Batch Processing, transaction data is accumulated over a period of time and processed periodically. In Real-time (or Online) Processing,
data is processed immediately after a transaction occurs. A transaction processing system supports these tasks by imposing a set of rules and guidelines that specify how to record, process, and store a given transaction.

There are five functional categories of TPS: sales/marketing, manufacturing/production, finance/accounting, human resources, and other types of TPS that are unique to a particular industry.

A TPS is the data lifeline for a company because it is the source or data for other information systems, such as MIS and DSS. Hence, if the TPS shuts down, the consequences can be serious for the organization. A TPS is also the main link between the organization and external entities, such as customer suppliers, distributors, and regulatory agencies.

3.9.1.2. Process Control System

Operation support system makes routine decisions that control operational processes. Examples are automatic inventory reorder decisions and production control decisions. This includes a category of information system called process control system (PCS), in which decisions adjusting a physical production process are automatically made by computers. For example, petroleum refineries and the assembly lines of automated factories use such system. They monitor a physical process, capture and process data detected by sensors, and make real time adjustments to a process.

3.9.1.3.
Office Automation System

Another major role of operations support system is the transformation of traditional manual office methods and paper communications media.

Office automation system (OAS) collects, process, store, and transmit information in the form of electronic office communications. These automated systems rely on text processing, telecommunications and other information system technologies to enhance office communications and productivity. – James O’Brien

This system supports the automation of various managerial and clerical activities. The primary goals of office automation are to enhance communication in the workplace and increase the efficiency and productivity of knowledge workers and clerical workers.

For Example, a business may use word processing for office correspondence, electronic mail to send and receive electronic messages, desktop publishing to produce a company newsletter, and teleconferencing to hold electronic meeting

  1. MANAGEMENT SUPPORT SYSTEM

When information system focuses on providing information and support for effective decision making by managers, they can be called management support system (MSS). MSS
support the decision-making needs of strategic management, tactical (middle) management, and operating (supervisory) management. Providing information and support for management decision-making by all levels of management (from top executives to middle managers to supervisors) is a complex task. Conceptually, several major types of information system are needed to support a variety of managerial end user responsibilities:

  • Management Information system
  • Decision Support System
  • Executive Information system

3.9.2.1. Management Information system

Management Information system (MIS) is the most common form of management support system. They provide managerial end users with information products that support much of their day-to-day decision-making needs. MIS provide a variety of reports and displays to management. The content of these information products is specified in advance by managers so that they contain information that managers need. MIS retrieve information about internal operations from databases that have been updated by transaction processing system. They also obtain data about the business environment from external sources. Information products provided to managers include displays and reports that can be furnished (1) on demand (2) periodically, according to a predetermined schedule, or (3) whenever exceptional conditions occur.

3.9.2.2. Decision Support System

Decision support system (DSS) is computerized systems that provide managers with internal and external data and decision-making models that facilitate semi-structured decision-making. – Gupta


Decision support systems are interactive, computer-based information system that uses decision models and specialized databases to assist the decision-making process of managerial end users. – O’Brien

DSS help managers make decisions that are semi structured, unique, or rapidly changing, and not easily specified in advance. DSS have to be responsive enough to run several times a day in order to correspond to changing conditions. While DSS use internal information from TPS and MIS, they often bring in information from external sources, such as current stock prices of competitors.

Example: A tactical decision is partly structure and partly unstructured. An Example of a tactical decision is building on a contract. Part of the task is structure- for example, considering standard operational cost and overheads- while part is unstructured, since the bidder must take in to account the way competitors may bid on the same contract.

3.9.2.3. Executive Information system

Senior managers use a category of information system called executive information system (ESS) to make decision. “Information system at the strategic level of an organization designed to address unstructured decision making through advanced graphics and communication.” –Laudon and Laudon

Top executives get the information they need from many sources, including letters, memos, periodicals, and reports produced manually as well as by computer system. Other sources of executive information are meetings, telephone calls, and social activities. Thus, much of a top executive’s information comes from non-computer sources


ESS designed to meet the information needs to top management engaged in long-range planning, crisis management, and other strategic decisions. Strategic decisions are unique, non-repetitive, and future-oriented decisions, which address long-term issues such as emerging markets, merger and acquisition strategies, new-product development, and investment strategies. Such system assists in the making of decisions that require an in-depth understanding of the firm and of the industry in which the firm operates.


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