Master of Business Administration – MBA Semester 2

MB0047 – Management Information System - 4 Credits

(Book ID: B1136)
Assignment Set- 1
60 Marks

What is MIS? Define the characteristics of MIS? What are the basic Functions of MIS? Give some
Disadvantage of MIS?

Answer:

MIS is popularly known as the Management Information System. MIS is considered as one such
method of generating information which is used by management of organization for decision Making,
control of activities, operations etc. During the period 1940 to 1960 computers were commercially used
for census and payroll work. This involved large amount of data and its processing. Since then the
commercial application exceeded the scientific applications for which the computer were mainly
intended for. MIS is an information System which helps in providing the management of an organization
with information which is used by management for decision making.

Management information systems (MIS)

Management information systems (MIS) are a combination of hardware and software used to process
information automatically. Commonly, MIS are used within organizations to allow many individuals to
access and modify information. In most situations, the management information system mainly operates
behind the scenes, and the user community is rarely involved or even aware of the processes that are
handled by the system.

A computer system used to process orders for a business could be considered a management
information system because it is assisting users in automating processes related to orders. Other
examples of modern management information systems are websites that process transactions for an
organization or even those that serve support requests to users. A simple example of a management
information system might be the support website for a product, because it automatically returns
information to the end user after some initial input is provided.

MIS characteristics

 It supports transaction handling and record keeping.

 It is also called as integrated database Management System which supports in major

functional areas.

 It provides operational, tactical, and strategic level managers with east access to timely but,
for the most, structured information.
  It supports decision –making function which is a vital role of MIS.

 It is flexible which is needed to adapt to the changing needs of the organization.

 It promotes security system by providing only access to authorized users.

 MIS not only provides statistical and data analysis but also works on the basis on MBO
(management by objectives). MIS is successfully used for measuring performance and
making necessary change in the organizational plans and procedures. It helps to build
relevant and measurable objectives, monitor results, and send alerts.

 Coordination: MIS provides integrated information so that all the departments are aware of
the problem and requirements of the other departments. This helps in equal interaction of the
different centers and connects decision centers of the organization.

 Duplication of data is reduced since data is stored in the central part and same data can be
used by all the related departments.

 MIS eliminates redundant data.

 It helps in maintaining consistency of data. It is divided into subsystems. Handlings with

small systems are much easier than an entire system. This helps in giving easy access of
data, accuracy and better information production.

 MIS assembles, process, stores, Retrieves, evaluates and disseminates the information.

Function of MIS

The main functions of MIS are:

 Data Processing: Gathering, storage, transmission, processing and getting output of the data.
Making the data into information is a major task.

 Prediction: Prediction is based on the historical data by applying the prior knowledge
methodology by using modern mathematics, statistics or simulation. Prior knowledge varies on
the application and with different departments.

 Planning: Planning reports are produced based on the enterprise restriction on the companies
and helps in planning each functional department to work reasonably.

 Control: MIS helps in monitoring the operations and inspects the plans. It consists of differences
between operation and plan with respect to data belonging to different functional department. It
controls the timely action of the plans and analyzes the reasons for the differences between the
 operations and plan. Thereby helps managers to accomplish their decision making task
successfully.

 Assistance: It stores the related problems and frequently used information to apply them for
relative economic benefits. Through this it can derive instant answers of the related problem.

 Database: This is the most important function of MIS. All the information is needs a storage
space which can be accessed without causing any anomalies in the data. Integrated Database
avoids the duplication of data and thereby reduces redundancy and hence consistency will be
increased.

 The major function of MIS lies in application of the above functions to support the managers and
the executives in the organization in decision-making.

MIS Function

Disadvantages of MIS

The following are some of the disadvantages of MIS:

 MIS is highly sensitive: MIS is very helpful in maintaining logging information of an authorized
user. This needs to monitor constantly.
  Quality of outputs is governed by quality of inputs.

 MIS budgeting: There is difficulty in maintaining indirect cost and overheads. Capturing the
actual cost needs to have an accrual system having true costs of outputs which is extremely
difficult. It has been difficult to establish definite findings.

 MIS is not flexible to update itself for the changes.

 The changes in the decision of top level management decrease its effectiveness.

 Information accountability is based on the qualitative factors and the factors like morality,
confidence or attitude will not have any base.

2. Explain Knowledge based system? Explain DSS and OLAP with example?

Answer:

Knowledge based system are the systems based on knowledge base. Knowledge base is the database
maintained for knowledge management which provides the means of data collections, organization and
retrieval of knowledge. The knowledge management manages the domain where it creates and enables
organization for adoption of insights and experiences.

There are two types of knowledge bases.

a. Machine readable knowledge bases: The knowledge base helps the computer to process through. It
makes the data in the computer readable code which makes the operator to perform easier. Such
information sare used by semantic web. Semantic web is a web that will make a description of the
system that a system can understand.

b. Human readable knowledge bases: They are designed to help people to retrieve knowledge. The
information need to be processed by the reader. The reader can access the information and synthesize
their own.

Knowledge based system refers to a system of data and information used for decision making. The
system is automated to work on the knowledge based data and information required in a particular
domain of management activity. The processing is done based on the past decisions taken under
suitable conditions. Decision making is based on the fact that the condition is similar to the past
situation hence the decision is also is similar.
Examples of KBS are intelligent systems, robotics, neural networks etc.

Decision Support Systems (DSS)

DSS is an interactive computer based system designed to help the decision makers to use all l the
resources available and make use in the decision making. In management many a time problems arise
out of situations for which simple solution may not be possible. To solve such problems you may have
to use complex theories. The models that would be required to solve such problems may have to be
identified. DSS requires a lot of managerial abilities and managers judgment.

You may gather and present the following information by using decision support application:

 Accessing all of your current information assets, including legacy and relational data sources,
cubes, data warehouses, and data marts

 Comparative sales figures between one week and the next

 Projected revenue figures based on new product sales assumptions

 The consequences of different decision alternatives, given past experience in a context that is
described.

Manager may sometimes find it difficult to solve such problems. E.g. – In a sales problem if there is
multiple decision variables modeled as a simple linear problem but having multiple optima, it becomes
difficult to take a decision. Since any of the multiple optima would give optimum results. But the strategy
to select the one most suitable under conditions prevailing in the market, requires skills beyond the
model.

It would take some trials to select a best strategy. Under such circumstances it would be easy to take
decision if a ready system of databases of various market conditions and corresponding appropriate
decision is available. A system which consists of database pertaining to decision making based on
certain rules is known as decision support system. It is a flexible system which can be customized to
suit the organization needs. It can work in the interactive mode in order to enable managers to take
quick decisions. You can consider decision support systems as the best when it includes high-level
summary reports or charts and allow the user to drill down for more detailed information.

A DSS has the capability to update its decision database. Whenever manager feels that a particular
decision is unique and not available in the system, the manager can chose to update the database with
such decisions. This will strengthen the DSS to take decisions in future.

There is no scope for errors in decision making when such systems are used as aid to decision making.
DSS is a consistent decision making system. It can be used to generate reports of various lever
management activities. It is capable of performing mathematical calculations and logical calculation
depending upon the model adopted to solve the problem. You can summarize the benefits of DSS into
following:
  Improves personal efficiency

 Expedites problem solving

 Facilitates interpersonal communication

 Promotes learning or training

 Increases organizational control

 Generates new evidence in support of a decision

 Creates a competitive advantage over competition

 Encourages exploration and discovery on the part of the decision maker

 Reveals new approaches to thinking about the problem space

Online Analytical Processing (OLAP)

OLAP refers to a system in which there are predefined multiple instances of various modules used in
business applications. Any input to such a system results in verification of the facts with respect to the
available instances.

A nearest match is found analytically and the results displayed form the database. The output is sent
only after thorough verification of the input facts fed to the system. The system goes through a series of
multiple checks of the various parameters used in business decision making. OLAP is also referred to
as a multi dimensional analytical model. Many big companies use OLAP to get good returns in
business.

The querying process of the OLAP is very strong. It helps the management take decisions like which
month would be appropriate to launch a product in the market, what should be the production quantity
to maximize the returns, what should be the stocking policy in order to minimize the wastage etc.

A model of OLAP may be well represented in the form of a 3D box. There are six faces of the box. Each
adjoining faces with common vertex may be considered to represent the various parameter of the
business situation under consideration. E.g.: Region, Sales & demand, Product etc.
Model of OLAP

3. What are Value Chain Analysis & describe its significance in MIS? Explain what is meant by
BPR? What is its significance? How Data warehousing & Data Mining is useful in terms of MIS?

Answer:
 
Value Chain
Every firm performs a set of activities that helps in designing, producing, marketing, delivering and
supporting its products. These activities form a process. At every stage of the process, the firm adds
value.  The chain of activities from raw material procurement to the after-sales service is called the
value chain. It identifies nine strategic activities, i.e. five primary and four support activities, to create
value, as shown in below figure. Primary activities are the activities that are involved in creating,
distributing, selling and providing after sales assistance for a product. Primary activities are those
activities that are involved in the physical creation of the product,

The Generic Value Chain

Marketing and after-sales support. The primary activities involve buying and bringing the materials into
the firm (inbound logistics), manufacturing the product (operations), shipping the goods which includes
warehousing, order processing, scheduling, distribution etc., (outbound logistics), advertising,
promotion, sales force management and pricing (marketing and sales), and providing services like
installation, training, repair, etc., (service).

Support activities assist primary activities by providing infrastructure that allows them to take place on
an ongoing basis.  Support activities such as procurement, hiring the personnel, R&D, infrastructure
(i.e. general management, planning, government activities and quality management), accounting, and
legal activities, etc., are handled by various departments. The value chain includes a profit margin,
creating value that exceeds cost so as to generate a return for the effort.  A proper coordination of all
activities between the various departments enhances the performance of various activities in the value
chain, leading to the enhanced overall performance of the firm.

A company’s operations should be divided into specific activities or business processes to conduct
value chain analysis. Then the cost incurred on carrying out each activity is calculated to measure the
performance. The value chain of an organization differs from that of other organizations. The way in
which activities are performed in the value chain provides a competitive advantage for a company.
However, the organization should measure the performance of every activity in the value chain with
that of the competitors. If the performance of activity of a competitor is better, the organization should
benchmark it and try to improve its performance continuously.

Why it is important MIS:

Value-addition activities like production, marketing delivery, and servicing of the product. These
activities are connected in a chain. Support activities include those providing purchased inputs,
technology, human resources, or overall infrastructure functions to support the primary activities.

It is possible to reduce the transaction cost by proper coordination of all the activities. It should be
possible to gather better information for various controls and also replace the same by less costlier
activities. It will also be possible to reduce the overall time required to complete an activity.

Therefore coordination is very important to achieve competitive advantage. For this it is necessary to
manage the value chain as a system rather than as separate parts. An enterprise’s value chain for
competing in a particular industry is embedded in a larger stream of activities. What Porter termed as
‘value system’, may be referred to as the ‘industry value-chain’.

Business Process Re-engineering (BPR)

The existing system in the organization is totally reexamined and radically modified for incorporating the
latest technology. This process of change for the betterment of the organization is called as Business
process re-engineering. This process is mainly used to modernize and make the organizations efficient.
BPR directly affects the performance. It is used to gain an understanding the process of business and to
understand the process to make it better and re-designing and thereby improving the system.

BPR is mainly used for change in the work process. Latest software is used and accordingly the
business procedures are modified, so that documents are worked upon more easily and efficiently. This
is known as workflow management.

Importance of BPR

Business process are a group of activities performed by various departments, various organizations or
between individuals that is mainly used for transactions in business. There may be people who do this
transaction or tools. We all do them at one point or another either as a supplier or customer. You will
really appreciate the need of process improvement or change in the organizations conduct with
business if you have ever waited in the queue for a longer time to purchase 1 kilo of rice from a Public
Distribution Shop (PDS-ration shop). The process is called the check-out process. It is called process
because uniform standard system has been maintained to undertake such a task. The system starts
with forming a queue, receiving the needed item form the shop, getting it billed, payment which involves
billing, paying amount and receiving the receipt of purchase and the process ends up with the exit from
the store. It is the transaction between customer and supplier.

The above activities takes place between the customer and supplier which forms the process steps this
example explains the business process. The business process may be getting admission to the college
and graduating from the college, building house, and implementing new technology to an organization
(Example EDUNXT in SMUDE), etc

A Process can be represented by triangle:

Continuous process

Business process reengineering is a major innovation changing the way organizations conduct their
business. Such changes are often necessary for profitability or even survival.

BPR is employed when major IT projects such as ERP are undertaken. Reengineering involves
changes in structure, organizational culture and processes. Many concepts of BPR changes
organizational structure. Team based organization, mass customization; empowerment and
telecommuting are some of the examples. The support system in any organization plays a important
role in BPR. ES, DSS, AI (discussed later) allows business to be conducted in different locations,
provides flexibility in manufacturing permits quicker delivery to customers and supports rapid paperless
transactions among suppliers, manufacturers and retailers. Expert systems can enable organizational
changes by providing expertise to non experts. It is difficult to carry out BPR calculations using ordinary
programs like spreadsheets etc. Experts make use of applications with simulations tools for BPR.
Reengineering is basically done to achieve cost reduction, increase in quality, improvement in speed
and service. BPR enable a company to become more competitive in the market. Employees work in
team comprising of managers and engineers to develop a product. This leads to the formation of
interdisciplinary teams which can work better than mere functional teams. The coordination becomes
easier and faster results can be achieved. The entire business process of developing a product gets a
new dimension. This has led to reengineering of much old functional process in organizations.

Data Warehousing
– Data Warehouse is defined as collection of database which is referred as relational database for the
purpose of querying and analysis rather than just transaction processing. Data warehouse is usually
maintained to store heuristic data for future use. Data warehousing is usually used to generate reports.
Integration and separation of data are the two basic features need to be kept in mind while creating a
data warehousing. The main output from data warehouse systems are; either tabular listings (queries)
with minimal formatting or highly formatted "formal" reports on business activities. This becomes a
convenient way to handle the information being generated by various processes. Data warehouse is an
archive of information collected from wide multiple sources, stored under a unified scheme, at a single
site. This data is stored for a long time permitting the user an access to archived data for years. The
data stored and the subsequent report generated out of a querying process enables decision making
quickly. This concept is useful for big companies having plenty of data on their business processes. Big
companies have bigger problems and complex problems. Decision makers require access to
information from all sources. Setting up queries on individual processes may be tedious and inefficient.
Data warehouse may be considered under such situations.

Data warehouse Architecture

Data ware house is center part of data repository. Data warehousing provides a strategic approach to
all the business. Data warehouse is broadly famous for its characteristics like:

a. Subject oriented: Data warehouse has the ability to analyze the data. The ability to define by subject
matter makes DW subject oriented.

b. Integrated: This resolves the problems of conflicts and inconsistencies existing in the units of
measure.

c. Non volatile: Once the data is entered in the warehouse it shall not change. This characteristics is
very important because after all the purpose of heuristic data is for future use.

d. Time variant: The data warehouse focus on change over time. To discover new trends in business,
analysts need large amount of data which is contrasting to OLTP (Online transaction Processing) which
works on heuristic data.

It is observed that all the companies are profit oriented and also want to exist in the market along with
their competitors. Data warehousing is of strategic value because it enables us to achieve the former
while deftly avoiding the latter. This is the strategic spirit in which we should understand, implement,
and manage data warehousing. A very powerful introduction to a data warehousing business case said
the following:
"The strategic intent of our data warehousing is to enable the business to win in the marketplace every
day, with every customer, and with every purchase. By repositioning our operational data and
combining it with selected foreign data, we will empower our employees so that they can routinely
delight and excite our customers. Through our unique appreciation of the value of our data assets, we
will elevate our data warehouses to the point where they become a compelling and durable contributor
to the sustainable competitive advantage of the business. In this way, data warehousing will enable the
business to impress its attitude on the marketplace and prevail over its competitors who have already
lost."

Have you implemented data warehousing with such a cogent strategic intent? Sun Tzu said:

"Strategy is important to the nation-it is the ground of death and life, the path of survival and destruction,
so it is imperative to examine it. There is a way of survival which helps and strengthens you; there is a
way of destruction which pushes you into oblivion."

So data warehousing is a path to survival that helps and strengthens you. Our strategic understanding
of data warehousing is complete.

BPR uses all these technologies like data bases, data mining, and data warehousing helps the
company to perform a strategic and object oriented performance.

Data Mining

– Data mining is primarily used as a part of information system today, by companies with a strong
consumer focus – retail, financial, communication, and marketing organizations. It enables these
companies to determine relationships among "internal" factors such as price, product positioning, or
staff skills, and "external" factors such as economic indicators, competition, and customer
demographics. And, it enables them to determine the impact on sales, customer satisfaction, and
corporate profits. Finally, it enables them to "drill down" into summary information to view detail
transactional data. With data mining, a retailer could use point-of-sale records of customer purchases to
send targeted promotions based on an individual’s purchase history. By mining demographic data from
comment or warranty cards, the retailer could develop products and promotions to appeal to specific
customer segments.

Data Mining is a collaborative tool which comprises of database systems, statistics, machine learning,
visualization and information science. Based on the data mining approach used, different techniques
form the other discipline can be used such as neural networks, artificial intelligence, fuzzy logic,
knowledge representation, high performance computing and inductive logic programming.
Data Mining Process

Data mining refers to extracting or mining knowledge from large amount of data. There may be other
terms which refer data mining such as knowledge mining, knowledge extraction, data/pattern analysis,
data archeology, and data dredging. The Knowledge discovery as a process may consist of following
steps:

1. Data Cleaning: It removes noise and inconsistent data.

2. Data integration: It is where multiple data sources are combined.

3. Data selection: Data relevant to the analysis task are retrieved from the database.

4. Data transformation: Data are transformed or consolidated into forms appropriate for mining by
performing summary or aggregation operations, for instance.

5. Data mining: An essential process where intelligent methods are applied in order to extract data
patterns.

6. Pattern evaluation: To identify the truly interesting patterns representing knowledge based on some
interesting measure.

7. Knowledge presentation: Visualization and knowledge representation techniques are used to present
the mined knowledge to the users.

When you look at the above step you will find that data mining is a very important step in knowledge
representation. It interacts with the user for knowledge base.

So it is found that there is necessity of a typical architecture for data mining as a big process. The
architecture of the data mining has the following components:
1. Database, data warehouse and information repository: This is one or a set of databases, data
warehouse, and information repository which can be used for data cleaning and data integration.

2. Database server: This Server is responsible for fetching the relevant data

3. Data mining engine: This helps in accessing the user through applications. It accesses data from the
warehouse with the help of standard data connectivity mechanisms. Usually database drivers are used
to connect the database.

4. Patterns evaluation model: It acquires the data to be evaluated form the database, producing the
pattern edge. This model scans the data. It searches and creates the interesting patterns based on the
thresholds.

5. Graphical user interface: It communicates between the user and the data mining system. It allows the
user to interact with the system and specifies the data mining queries or task.

Data mining is applicable to any kind of information repository. Some of these may be relational
databases, data warehouse, transactional databases, advanced database management systems,
WWW and files. Advance database systems include object oriented databases, object relational
databases, and application oriented databases.

The best example for data mining which is so close to our lives is Google. The success of Google
depends on the use of data mining techniques in the analysis of data in the search engine to meet your
search demand.

4. Explain DFD & Data Dictionary? Explain in detail how the information requirement is
determined for an organization?

Answer:

Data flow diagrams represent the logical flow of data within the system. DFD do not explain how the
processes convert the input data into output. They do not explain how the processing takes place.
DFD uses few symbols like circles and rectangles connected by arrows to represent data flows. DFD
can easily illustrate relationships among data, flows, external entities an stores. DFD can also be drawn
in increasing levels of detail, starting with a summary high level view and proceeding o more detailed
lower level views.

A number of guidelines should be used in constructing DFD.

 Choose meaningful names for the symbols on the diagram.

 Number the processes consistently. The numbers do not imply the sequence.

 Avoid over complex DFD.

 Make sure the diagrams are balanced.

Data Dictionary

The data dictionary is used to create and store definitions of data, location, format for storage and other
characteristics. The data dictionary can be used to retrieve the definition of data that has already been
used in an application. The data dictionary also stores some of the description of data structures, such
as entities, attributes and relationships. It can also have software to update itself and to produce reports
on its contents and to answer some of the queries.

Information is useful for an Organization in many aspects. It is mainly use for planning and
developing process.

The information needs for the implementation of the business plan should find place in the MIS. To
ensure such an alignment possibility, it is necessary that the business plan – strategic or otherwise,
states the information needs. The information needs are then traced to the source data and the systems
in the organization which generate such a data. The plan of development of the MIS is linked with the
steps of the implementation in a business development plan. The system of information generation is so
planned that strategic information is provided for the strategic planning, control information is provided
for a short term planning and execution. The details of information are provided to the operations
management to assess the status of an activity and to find ways to make up, if necessary. Once the
management needs are translated into information needs, it is left to the designer to evolve a plan of
MIS development and implementation.

While preparing the schedule due consideration is given to the importance of the system in the overall
information requirement. Due regard is also given to logical system development. For example, it is
necessary to develop the accounting system first and then the analysis.

Further, unless the systems are fully developed their integration is not possible. This development
schedule is to be weighed against the time scale for achieving certain information requirement linked to
a business plan. If these are not fully met, it is necessary to revise the time schedule and also the
development schedule, whenever necessary.

The selection of the architecture, the approach to the information system development and the choice of
hardware and software are the strategic decisions in the design and development of the MIS in the
organization. The organizations which do not care to take proper decisions in these areas suffer from
over-investment, under-utilization and are not able to meet the critical information requirements.

5. What is ERP? Explain its existence before and its future after? What are the advantages &
Disadvantages of ERP? What is Artificial Intelligence? How is it different from Neural Networks?

Answer:

Enterprise resource planning (ERP) is a system that integrates all of these functions into a single
system, designed to serve the needs of each different department within the enterprise. ERP is more of
a methodology than a piece of software, although it does incorporate several software applications,
brought together under a single, integrated interface.

ERP (enterprise resource planning) is an industry term for the broad set of activities that helps a
business manage the important parts of its business. The information made available through an ERP
system provides visibility for key performance indicators (KPIs) required for meeting corporate
objectives. ERP software applications can be used to manage product planning, parts purchasing,
inventories, interacting with suppliers, providing customer service, and tracking orders. ERP can also
include application modules for the finance and human resources aspects of a business. Typically, an
ERP system uses or is integrated with a relational database system.

The deployment of an ERP system can involve considerable business process analysis, employee
retraining, and new work procedures.

ERP Before and After

Before

Prior to the concept of ERP systems, departments within an organization (for example, the human
resources (HR)) department, the payroll department, and the financial department) would have their
own computer systems. The HR computer system (often called HRMS or HRIS) would typically contain
information on the department, reporting structure, and personal details of employees. The payroll
department would typically calculate and store paycheck information. The financial department would
typically store financial transactions for the organization. Each system would have to rely on a set of
common data to communicate with each other. For the HRIS to send salary information to the payroll
system, an employee number would need to be assigned and remain static between the two systems to
accurately identify an employee. The financial system was not interested in the employee-level data, but
only in the payouts made by the payroll systems, such as the tax payments to various authorities,
payments for employee benefits to providers, and so on. This provided complications. For instance, a
person could not be paid in the payroll system without an employee number.

Advantages and Disadvantages

Advantages – In the absence of an ERP system, a large manufacturer may find itself with many
software applications that do not talk to each other and do not effectively interface. Tasks that need to
interface with one another may involve:

 A totally integrated system

  The ability to streamline different processes and workflows

 The ability to easily share data across various departments in an organization

 Improved efficiency and productivity levels

 Better tracking and forecasting

 Lower costs

 Improved customer service

Change how a product is made, in the engineering details, and that is how it will now be made. Effective
dates can be used to control when the switch over will occur from an old version to the next one, both
the date that some ingredients go into effect, and date that some are discontinued. Part of the change
can include labeling to identify version numbers.

Some security features are included within an ERP system to protect against both outsider crime, such
as industrial espionage, and insider crime, such as embezzlement. A data tampering scenario might
involve a disgruntled employee intentionally modifying prices to below the breakeven point in order to
attempt to take down the company, or other sabotage. ERP systems typically provide functionality for
implementing internal controls to prevent actions of this kind. ERP vendors are also moving toward
better integration with other kinds of information security tools.

Disadvantages – Many problems organizations have with ERP systems are due to inadequate
investment in ongoing training for involved personnel, including those implementing and testing
changes, as well as a lack of corporate policy protecting the integrity of the data in the ERP systems
and how it is used.

While advantages usually outweigh disadvantages for most organizations implementing an ERP
system, here are some of the most common obstacles experienced:

Usually many obstacles can be prevented if adequate investment is made and adequate training is
involved, however, success does depend on skills and the experience of the workforce to quickly adapt
to the new system.

 Customization in many situations is limited

 The need to reengineer business processes

 ERP systems can be cost prohibitive to install and run

 Technical support can be shoddy

  ERP’s may be too rigid for specific organizations that are either new or want to move in a new
direction in the near future.

Artificial Intelligence and Neural Networks

Artificial intelligence is a field of science and technology based on disciplines such as computer science,
biology, psychology, linguistics, mathematics and engineering. The goal of AI is to develop computers
that can simulate the ability to think, see, hear, walk, talk and feel. In other words, simulation of
computer functions normally associated with human intelligence, such as reasoning, learning and
problem solving.

AI can be grouped under three major areas: cognitive science, robotics and natural interfaces. [Source
MIS 7th edition, James O Brien and George M Marakas- Tata Mc Graw Hill].

Cognitive science focuses on researching on how the human brain works and how humans think and
learn. Applications in the cognitive science area of AI include the development of expert systems and
other knowledge-based systems that add a knowledge base and some reasoning capability to
information systems. Also included are adaptive learning systems that can modify their behavior based
on information they acquire as they operate. Chess-playing systems are some examples of such
systems.

Fussy logic systems can process data that are incomplete or ambiguous. Thus, they can solve semi-
structured problems with incomplete knowledge by developing approximate inferences and answers, as
humans do.

Neural network software can learn by processing sample problems and their solutions. As neural nets
start to recognize patterns, they can begin to program themselves to solve such problems on their own.

Neural networks are computing systems modeled after the human brain’s mesh like network of
interconnected processing elements, called neurons. The human brain is estimated to have over 100
billion neuron brain cells. The neural networks are lot simpler in architecture. Like the brain, the
interconnected processors in a neural network operate in parallel and interact dynamically with each
other.

This enables the network to operate and learn from the data it processes, similar to the human brain.
That is, it learns to recognize patterns and relationships in the data. The more data examples it receives
as input, the better it can learn to duplicate the results of the examples it processes. Thus, the neural
networks will change the strengths of the interconnections between the processing elements in
response to changing patterns in the data it receives and results that occur.

For example, neural network can be trained to learn which credit characteristics result in good or bad
loans. The neural network would continue to be trained until it demonstrated a high degree of accuracy
in correctly duplicating the results of recent cases. At that point it would be trained enough to begin
making credit evaluations of its own.
Genetic algorithm software uses Darwinian (survival of the fittest), randomizing and other mathematics
functions to simulate evolutionary processes that can generate increasingly better solutions to
problems.

Robotics: Ai, engineering and physiology are the basic disciplines of robotics. This technology
produces robot machines with computer intelligence and computer-controlled, humanlike physical
capabilities. This area thus includes applications designed to give robots the power of sight, or visual
perception; touch or tactile capabilities; dexterity or skill in handling and manipulation; locomotion, or the
physical ability to move over any terrain; and navigation, or the intelligence to properly find one’s way to
a destination.

Natural interfaces: The development of natural interfaces is essential to the natural use of computers by
humans. Development of natural languages and speech recognition are major thrusts in this area of AI.
Being able to talk to computers and robots in conversational human languages and have them
understand us as easily as we understand each other is a goal of AI research. This involves research
and development in linguistics, psychology, computer science and other disciplines.

Other natural interface research applications include the development of multi-sensory devices that use
a variety of body movements to operate computers. This is related to the emerging application area of
virtual reality. Virtual reality involves using multi-sensory human– computer interfaces that enable
human users to experience computer simulated objects, spaces activities and worlds as if they actually
exist.
6. Distinguish between closed decision making system & open decision making system? What
is ‘What – if‘ analysis? Why is more time spend in problem analysis & problem definition as
compared to the time spends on decision analysis?

Answer:

The decision-making systems can be classified in a number of ways. There are two types of systems
based on the manager’s knowledge about the environment. If the manager operates in a known
environment then it is a closed decision-making system. The conditions of the closed decision-making
system are:

a) The manager has a known set of decision alternatives and knows their outcomes fully in terms of
value, if implemented.

b) The manager has a model, a method or a rule whereby the decision alternatives can be generated,
tested, and ranked for selection.

c) The manager can choose one of them, based on some goal or objective criterion.

Few examples are a product mix problem, an examination system to declare pass or fail, or an
acceptance of the fixed deposits.

If the manager operates in an environment not known to him, then the decision-making system is
termed as an open decision-making system. The conditions of this system in contrast closed decision-
making system are:

a) The manager does not know all the decision alternatives.

b) The outcome of the decision is also not known fully. The knowledge of the outcome may be a
probabilistic one.

c) No method, rule or model is available to study and finalise one decision among the set of decision
alternatives.

d) It is difficult to decide an objective or a goal and, therefore, the manager resorts to that decision,
where his aspirations or desires are met best.

Deciding on the possible product diversification lines, the pricing of a new product, and the plant
location, are some decision-making situations which fall in the category of the open decision-making
systems.
The MIS tries to convert every open system to a closed decision-making system by providing
information support for the best decision. The MIS gives the information support, whereby the manager
knows more and more about environment and the outcomes, he is able to generate the decision
alternatives, test them and select one of them. A good MIS achieves this.

What if analysis

Decisions are made using a model of the problem for developing various solution alternatives and
testing them for best choice. The model is built with some variables and relationship between variables.
In reality, the considered values of variables or relationship in the model may not hold good and
therefore solution needs to be tested for an outcome, if the considered values of variables or
relationship change. This method of analysis is called ‘what if analysis.’

For example, in decision-making problem about determining inventory control parameters (EOQ, Safety
Stock, Maximum Stock, Minimum Stock, Reorder level) lead time is assumed fairly constant and stable
for a planning period. Based on this, the inventory parameters are calculated. Inventory manager wants
to know how the cost of holding inventory will be affected if lead time is reduced by one week or
increased by one week. The model with changed lead time would compute the cost of holding inventory
under new conditions. Such type of analysis can be done for purchase price change, demand forecast
variations and so on. Such analysis helps a manager to take more learned decisions. ‘What if analysis’
creates confidence in decision-making model by painting a picture of outcomes under different
conditions?

Behavioural Concepts in Decision-making

The manager, being a human being, behaves in a peculiar way in a given situation. The response of
one manager may not be the same as that of the two other managers, as they differ on the behavioural
platform. Even though tools, methods and procedures are evolved, the decision is many a times
influenced by personal factors such as behaviour.

The managers differ in their approach towards decision-making in the organisation, and, therefore, they
can be classified into two categories, viz., the achievement-oriented, i.e., looking for excellence and the
task-oriented, i.e., looking for the completion of the task somehow. The achievement-oriented manager
will always opt for the best and, therefore, will be enterprising in every aspect of the decision-making.
He will endeavour to develop all the possible alternatives. He would be scientific, and therefore, more
rational. He would weigh all the pros and cons properly and then conclude.

The manager’s personal values will definitely influence ultimately. Some of the managers show a nature
of risk avoidance. Their behaviour shows a distinct pattern indicating a conservative approach to
decision-making – a path of low risk or no risk. Further, even though decision-making tools are
available, the choice of the tools may differ depending on the motives of the manager. The motives are
not apparent, and hence, are difficult to understand. A rational decision in the normal course may turn
out to be different on account of the motives of the manager.
The behaviour of the manager is also influenced by the position he holds in the organisation. The
behaviour is influenced by a fear and an anxiety that the personal image may be tarnished and the
career prospects in the organisation may be spoiled due to a defeat or a failure. The managerial
behaviour, therefore, is a complex mix of the personal values, the atmosphere in the organisation, the
motives and the motivation, and the resistance to change. Such behaviour sometimes overrides normal
decisions based on business and economic principles.

The interplay of different decision-making of all the managers in the organization shapes up the
organizational decision-making. The rationale of the business decision will largely depend upon the
individuals, their positions in the organization and their inter-relationship with other managers.

If two managers are placed in two decision-making situations, and if their objectives are in conflict, the
managers will arrive at a decision objectively, satisfying individual goals. Many a times, they may make
a conscious decision, disregarding organization’s objective to meet their personal goals and to satisfy
their personal values. If the manager is enterprising, he will make objectively rational decisions. But if
the manager is averse to taking risk, he will make a decision which will be subjectively rational as he
would act with limited knowledge and also be influenced by the risk averseness. Thus, it is clear that if
the attitudes and the motives are not consistent across the organization, the decision-making process
slows down in the organization.

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