Example of Information System

A typical organization is divided into operational, middle, and upper level.
 The information requirements for users at each level differ.
 Towards that end, there are number of information systems that support each level in an
organization.
 The following diagram illustrates the various levels of a typical organization.

Operational Management Level
 The operational level is concerned with performing day to day business transactions of the
organization.
 Examples of users at this level of management include cashiers at a point of sale, bank
tellers, nurses in a hospital, customer care staff, etc.
 Users at this level use make structured decisions.
 This means that they have defined rules that guides them while making decisions.
 For example, if a store sells items on credit and they have a credit policy that has some set
limit on the borrowing.
 All the sales person needs to decide whether to give credit to a customer or not is based on
the current credit information from the system.

Tactical Management Level
 This organization level is dominated by middle-level managers, heads of departments,
supervisors, etc.
 The users at this level usually oversee the activities of the users at the operational
management level.
 Tactical users make semi-structured decisions.
 The decisions are partly based on set guidelines and judgmental calls.
 As an example, a tactical manager can check the credit limit and payments history of a
customer and decide to make an exception to raise the credit limit for a particular customer.
 The decision is partly structured in the sense that the tactical manager has to use existing
information to identify a payments history that benefits the organization and an allowed
increase percentage.

Strategic Management Level
 This is the most senior level in an organization.
 The users at this level make unstructured decisions.
 Senior level managers are concerned with the long-term planning of the organization.
 They use information from tactical managers and external data to guide them when making unstructured decisions.

Examples:

Transaction Processing System (TPS)
 Transaction processing systems are used to record day to day business transactions of the
organization.
 They are used by users at the operational management level.
 The main objective of a transaction processing system is to answer routine questions such
as:
 How many printers were sold today?
 How much inventory do we have at hand?
 What is the outstanding due for John?
 By recording the day to day business transactions, TPS system provides answers to the
above questions in a timely manner.
 The decisions made by operational managers are routine and highly structured.
 The information produced from the transaction processing system is very detailed.

For example, banks that give out loans require that the company that a person works for
should have a memorandum of understanding (MoU) with the bank.
 If a person whose employer has a MoU with the bank applies for a loan, all that the
operational staff has to do is verify the submitted documents.
 If they meet the requirements, then the loan application documents are processed.
 If they do not meet the requirements, then the client is advised to see tactical management
staff to see the possibility of signing a MoU.
 Examples of transaction processing systems include:
 Point of Sale Systems – records daily sales
 Payroll Systems – processing employee salary, loans management, etc.
 Stock Control Systems – keeping track of inventory levels
 Airline Booking Systems – flights booking management

Management Information System (MIS)
 Management Information Systems (MIS) are used by tactical managers to monitor the
organization's current performance status.
 The output from a transaction processing system is used as input to a management
information system.
 The MIS system analyzes the input with routine algorithms i.e. aggregate, compare and
summarizes the results to produced reports that tactical managers use to monitor, control
and predict future performance.
 For example, input from a point of sale system can be used to analyze trends of products
that are performing well and those that are not performing well.

 This information can be used to make future inventory orders i.e. increasing orders for well-
performing products and reduce the orders of products that are not performing well.

 Examples of management information systems include:
 Sales Management Systems – they get input from the point of sale system
 Budgeting Systems – gives an overview of how much money is spent within the
organization for the short and long terms.
 Human Resource Management System – overall welfare of the employees, staff turnover,
etc.
 Tactical managers are responsible for the semi-structured decision.
 MIS systems provide the information needed to make the structured decision and based on
the experience of the tactical managers, they make judgment calls i.e. predict how much of
goods or inventory should be ordered for the second quarter based on the sales of the first
quarter.

Decision Support System (DSS)
 Decision support systems are used by senior management to make non-routine decisions.
 Decision support systems use input from internal systems (transaction processing systems
and management information systems) and external systems.
 The main objective of decision support systems is to provide solutions to problems that are unique and change frequently.
 Decision support systems answer questions such as:

 What would be the impact of employees' performance if we double the production lot at
the factory?
 What would happen to our sales if a new competitor entered the market?
 Decision support systems use sophisticated mathematical models, and statistical techniques
to provide solutions, and they are very interactive.
 Examples of decision support systems include:
 Financial Planning Systems – it enables managers to evaluate alternative ways of
achieving goals.
 Bank Loan Management Systems – it is used to verify the credit of the loan applicant and
predict the likelihood of the loan being recovered.