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TYPICAL INFORMATION SYSTEMS

Chapter-12

Typical Information Systems

Introduction

Today it is widely recognized that information systems’ knowledge is essential for managers because most organizations need information systems to survive and prosper. Information systems can help companies extend their reach to faraway locations, offer new products and services, reshape jobs and work flows, and perhaps profoundly change the way they conduct business.

In this chapter we will make you familiar about some of the micro and macro level information systems.

Micro Level Information Systems

So far, we have discussed most of the management and technological concepts related to development and implementation of management information systems. In this chapter, we will discuss the characteristics of major computerized information systems (viz. Accounting Information Systems, Inventory Control Systems, Marketing Systems and Human Resource Development Systems) of an organisation in generalized perspective along with the basic concepts of accounting, inventory, marketing and HRD (Human Resource Development). We will also examine the inputs and outputs of typical accounting, inventory, marketing and HRD systems in brief.

Accounting Information Systems

All organisations need systematic maintenance of their records that help in the preparation of the financial statements such as Profit & Loss Accounts and Balance Sheet. Accounting is the most important service activity in business. It is generally called the language of business. (Accounting is mainly concerned with the collecting, recording and evaluating the financial data and communicating information to the management and other people.) It is viewed as an information system since it has inputs (financial data), processes (evaluation of data) and outputs (financial statements). An accounting information system satisfies the information needs of management and other people (investors and shareholders, creditors, consumers, etc.) as summarised in Table 5.1.

Table 5.1: Information Needs of Various Users from an Accounting System

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MANAGEMENT INFORMATION SYSTEMS

Users Information Needs

Management Cost planning and cost control of operationsProfitability of the firmStrategic and tactical decisions

Shareholders Profitability of the firm & Investors Soundness of their investment

Growth prospects of the firm

Creditors Liquidity of the firmProfitability and financial soundness of the firm

Employees Settlement of salaries, wages, bonus, etc.Participation in management decisions

Government Managing the industrial economy of the countryCollection of sales, excise and other taxes

Consumers & Public Financial growth of the firm Social role of the firm in different sectors of the economy

Types of Accounting Information Systems

There are three general types of accounting information systems – (a) Financial Accounting System, (b) Management Accounting System and (c) Cost Accounting System.

(a) Financial Accounting System: This system provides financial statements to investors, governmental authorities and other interested parties in accordance with their reporting formats.

(b) Management Accounting System: It provides reports to managers (i) for strategic and tactical decisions and (ii) on profitability of the firm.

(c) Cost Accounting System: It provides reports to managers for cost planning and cost control of operations.

All three types of accounting information systems process the same accounting transactions and often share the data files. Therefore, an accounting information system is generally developed as an integrated system providing all the reports of the above three types. Accounting information system may also be integrated with other information systems like inventory, sales and marketing systems.

Conceptual Framework of Accounting

Accounting has evolved over a period of several years. During this period, certain rules and conventions have been accepted by professional accounting bodies like Institute of Chartered Accountants of India (ICAI) and American Institute of Certified Public Accountants (AICPA) which are known as Generally Accepted Accounting Principles (GAAP). These principles include rules, conventions and detailed procedures that are required to define accounting practices. The conceptual framework of accounting includes these principles on the basis of which accounting data is processed and reported.

Basic Accounting Concepts

In order to participate in the design of accounting information systems, managers must be aware of the basic accounting concepts which are discussed below in brief:

(a) Business Entity Concept: This concept considers business and owners (proprietor, partners and equity shareholders) as separate entities. So, for accounting purposes, the transactions of business and those of owners are accounted, evaluated and reported separately.

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(b) Monetary Concept: According to the monetary concept, for accounting purposes, only those transactions or events are recorded which can be expressed in terms of money. For instance, human resources that cannot be measured in monetary terms are not recorded in accounts.

(c) Cost Concept: According to this concept, the assets of a business are recorded at their original purchase prices and not at their current market values.

(d) Continuity Concept: This concept assumes a business entity as a ‘going concern’ which means that it would continue its operations for a long time. So, according to this concept, the owners have neither the intention nor the necessity to liquidate the operations of their business.

(e) Periodicity Concept: We have discussed that the management and other people need the accounting information. As the business entity is a ‘going concern’, it is necessary to measure its performance periodically. Such a period, which may be a calendar year (January to December) or a fiscal year (April to March) is known as an accounting period.

(f) Accrual Concept: According to this concept, the revenues and expenses should be recorded in that accounting period when they are earned and incurred, irrespective of the period when they are received and paid. For instance, if a payment for next accounting year is made in advance, then it cannot be considered as an expense for the current year and similarly, if the payment for previous accounting year is received, it cannot be considered as an income for current period.

(g) Matching Concept: According to the matching concept, (the revenues earned in an accounting period are matched with the expenses incurred on generating those revenues. This concept helps to measure the profitability on the sales/services made during an accounting period).

(h) Conservation Concept: This concept states that under conditions of uncertainty in determining the values of assets or liabilities, the assets should not be overstated and the liabilities should not be understated. Therefore, only expected losses should be accounted and not the anticipated incomes.

(i) Materiality Concept: According to this concept, the immaterial events and items need not be accounted strictly. For instance, the expenses incurred on daily-used office stationery items should be accounted in the accounting period when they are purchased irrespective of their consumption in current or next accounting period.

(j) Consistency Concept: This concept states that the firm must follow one method or procedure for recording a transaction if it could be recorded in several ways. For instance, depreciation on an asset can be determined in several ways, so the firm must decide one method for calculating the depreciation.

(k) Realisation Concept: This concept states that a revenue need not be received in cash but can also be recognised by realisation of its value.

Accounting Terminology

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Before discussing about various account books, financial statements and a typical accounting information system, let us first understand the following basic terminology of accounting:

Definition

(a) Double Entry Accounting: In double entry accounting, each transaction is recorded in two account heads – in one account head it is debited while in other, it is credited. The rules to debit or credit an account are summarised in Table 5.2.

(b) Account Head: The description of an account (e.g., Conveyance Expenses , Land & Building, Salary Payables A/c, Cash A/c, etc.) is called an account head.

(c) Debit: Debit is derived from the Latin word ‘debeo’ which means ‘owed to me’.(d) Credit: Credit is derived from the Latin word ‘credo’ which means ‘trust’.(e) Asset: The resource owned by the firm (e.g., Land, Building, Machinneries, Bank & balances,

etc.) as a result of past events is called an Asset.(f) Capital: The money contributed by the owners for running the business.(g) Working Capital: The part of the capital which is needed for financing of current needs of the

business.(h) Liability: The obligation of the firm (e.g., Salary Payables, Loan, Owner’s Equity etc.) is called a

liability.(i) Equity: The residual interest of owners in having more assets than liabilities is called an equity. (j) Revenue: The inflow of economic benefits (e.g., Sales), the increase in asset or the decrease in

liability that increases the equity is called Revenue or Income.(k) Expense: The outflow of economic benefits (e.g., Purchases), the decrease in asset or the

increase in liability that decreases the equity is called an expense. (l) Personal Accounts: Personal accounts include accounts of the persons (owners, employees or

others e.g., Komal’s A/c, Shefali’s A/c., etc.)(m) Real Accounts: Real accounts include accounts of things that can be measured in monetary

terms (e.g., Furniture A/c.).(n) Nominal Accounts: Nominal accounts define the nature of transactions (e.g., Salary A/c,

Conveyance A/c, etc.).(o) Debtor: A party from which the payment has to be received.(p) Creditor: A party to which the payment has to be made.

Table 5.2: Rules to Debit or Credit an Account

Type of Account Debit Credit

Personal Account Receiver’s account Giver’s account

Real Account What comes in What goes out (e.g., Cash)

Nominal Account All losses and expenses All gains and incomes

ExamplesMs Shefali borrows Rs 2000/- from Mr Vicky, the owner of a firm.Debit Shefali A/c (personal) and credit Vicky’s A/c (personal)

The firm purchased furniture worth Rs 5000/- by cash. Debit Furniture A/c (Real) and credit Cash A/c (Real).

The firm paid salary of Rs 3000/- by Cash to an employee.Debit Salary A/c (Nominal) and credit Cash A/c (Real).The firm received Rs 50000/- by cheque towards sales of books.Debit Bank A/c (Real) and Credit A/c (Nominal).

Account Books and Financial Statements

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Many types of account books and financial statements can be generated by a financial accounting system. In manual system of accounting, maintaining of account books in a prescribed manner is called Book-keeping while preparation of financial statements based on the account books is called Financial Accounting. However, in computerised system of accounting, no such distinction is found and a financial accounting system generates both account books and financial statements. The major types of account books are described below:

(a) Voucher: A transaction is recorded by debiting and crediting the two affected accounts on a document, called a voucher.

(b) Journal: Journal is an account book in which all the transactions are recorded in a chronological order (i.e., datewise). It is maintained only in manual system by entering information from the vouchers and is not required in computerised system.

(c) General Ledger: All the accounts are recorded and maintained individually (i.e., account headwise) in a book called General Ledger or simply Ledger. In manual system of accounting, the ledger is prepared by entering information from the journal by a process called posting while in computerised system, the data of vouchers (input) is processed to prepare a ledger (output).

(d) Cash Book: Cash Book is a special type of ledger in which only cash transactions are recorded and maintained.

(e) Bank Book: Bank Book is another special type of ledger in which only bank transactions are recorded and maintained.

(f) Sales Book: The credit sales of goods are recorded in a special ledger called Sales Book.

(g) Purchase Book: The purchase of goods on credit basis is recorded in another special ledger called Purchase Book.

(h) Debtor’s Ledger: The transactions (credit sales) of all debtors are recorded and maintained in Debtor’s Ledger.

(i) Creditor’s Ledger: The transactions (credit purchases) of all creditors are recorded and maintained in Creditor’s Ledger.

After preparation of all the above account books, the final statements of accounts are generated periodically (monthly or yearly). The major financial statements are described below:

(a) (Trial Balance is a list or financial statement prepared monthly. quarterly or annually to find out the balance of each account.) In a trial balance, all the debit balances are shown on one side and all the credit balances on the other. The total of debit balance must be matched with that of credit balance. The purpose of preparing the trial balance is to check whether all transactions are recorded and maintained correctly or not. In computerised system of accounting, the trial balance always matches provided the system is error free and maintained properly.

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(b) Trading Account: Trading Account is a financial statement prepared yearly to find out the gross profit or gross loss of the firm. The gross profit/loss is calculated as follows:

Gross Profit/Loss = Total Sales – Cost of goods sold

where cost of goods sold = Opening Stock + Purchases + Direct(Trading) Expenses

(c) Profit and Loss Account: After preparation of trading account, a financial statement called Profit and Loss Account (P/L A/c) is generated to find out the net profit or net loss of the firm. The net profit/loss is calculated as follows:

Net Profit/Loss = Gross Profit – Indirect (Administrative) Expenses

(d) Balance Sheet: The balance sheet is the most important financial statement of the company that shows its position of assets and liabilities on a particular date (generally at the end of an accounting period). The net profit/loss from the P/L A/c is added to/subtracted from the capital in the liabilities side of the balance sheet.

(e) Accounts Receivable Statement: This statement lists the name of debtors and the amounts to be received by the company.

(f) Accounts Payable Statement: This statement lists the name of the creditors and the amounts to be paid by the company.

Typical Financial Accounting System

The major objectives for implementing a computerized financial accounting system for an organisation are:

Maintaining account books.

Preparation of a General Ledger.

Generating Accounts Receivable and Accounts Payable statements.

Generating Profit & Loss Account and Balance Sheet.

Generating updated financial data for other systems (viz. Cost and Management accounting systems).

The various inputs to the system are:

Cash Vouchers

Bank Vouchers

Sale Vouchers or Bills to Customers

Purchase Vouchers or Bills from Vendors/Suppliers

Journal Vouchers

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A typical financial accounting system is illustrated in Figure 5.1. It generates the following outputs:

Account Books viz. Cash Book, Bank Book, Sales Book, Purchase Book, Journal and General Ledger

Trial Balance

Trading Account

Profit and Loss Accounts

Balance Sheet

Accounts Receivable Statement

Accounts Payable Statement

Typical Accounting Information System

(A typical accounting information system includes Financial Accounting, Cost Accounting and Management Accounting systems.) It may be integrated with other systems viz. Invoicing and Order Processing System, Inventory Control System, Production Planning and Control System and Payroll System. The major objectives of an accounting information system are-

Preparation of Account Books and Financial Statements

Generation of MIS reports.


Updated financial data from General Ledger and Accounts

Receivable/Payable System

Updated sales data from Invoicing System

Updated purchase data from Inventory System

Updated production data from Production Planning and Control System

Updated pay data from Payroll System

A typical accounting information system generates the following outputs:

Account Books viz. Cash Book, Bank Book, Sales Book, Purchase Book, Journal and General Ledger.

Financial Statements viz. Trial Balance, Trading Account, Profit and Loss Account, Balance Sheet, Accounts Receivable Statement and Accounts Payable Statements.

MIS Reports viz. Cost Analysis, Forecasting and Funds Management Reports.

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Figure 5.1: A Typical Financial Accounting System

Note: Cost Analysis report provides an analytical information about production and process costs for manufacturing various products. Forecasting report provides the information about the cash available to meet current obligations of the firm. It generally lists the sources and amounts of money coming into the firm alongwith their utilisations. Forecasting is an important activity of managerial planning. After a forecasting report is prepared, it is determined whether any external financing is necessary or not in order to meet the obligations of the company. Funds Management report analyses the possible sources of financing for preparing a financial plan.

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Figure 5.2: A Typical Integrated Accounting Information Systems

Inventory Control Systems

All organisations need an efficient system to maintain and control the optimum level of investment in all types of inventories. ‘Inventory’ refers to the stock of raw materials and finished goods available in the firm for production and sale. (An inventory control system ensures that proper stock levels of each item are maintained.) The improper stock levels (low or high) cause the following problems:

Low inventory of raw materials leads to idle time in a production process and hence, causes wastage of resources (labour, power, equipments, etc.) needed for production. It may also lead to decrease in sales due to out-of-stock specially during periods of peak demand.

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Vouchers

Challan and Sales Data

Purchase Data

Time Cards and

Employee Data

Production Data

General ledger and Account Receivable/

Payable System

Invoicing System

Inventory System

ProductionPlanning & Control

System

PayableSystem

Updated Financial

Data

Updated Sales Data

Updated Purchase

Data

Updated Production

Data

Updated Pay Data

Integrated

Accounting

Information

System

General LedgersCash BookBank BookSales BookPurchase BookJournal

Financkal Sttements viz Trial Balance, Trading Account, P & L Account and Balance Sheet

MIS Report vizForecasting and Fund ManagementReports

PayData


Low inventory of finished goods leads to backorder, lost sale and loss in goodwill of the company due to out-of-stock positions.

High inventory of raw materials and finished goods leads to unnecesssary investments and hence, causes a financial burden on the firm.

Therefore, maintaining of optimum level of inventories (neither high nor low) becomes critical for an organisation. Before discussing about various methods of inventory control, let us first be aware of basic terms of inventory.

Terminology of Inventory

The basic terms related to an inventory control system are described below:

Definition:

(a) Raw Materials: Raw materials refer to the materials required for production of finished goods.

(b) Finished Goods: The various raw materials undergo different stages of production to produce finished goods.

(c) Goods-in-Process: The goods in various stages of production are called Goods-in-Process.

(d) Raw Materials Inventory: It refers to the stock of raw materials.

(e) Finished Goods Inventory: It refers to the stock of finished goods.

(f) Goods-in-Process Inventory: It refers to the stock of goods-in-process inventory.

(g) Demand: The number of units of a product that buyers would be willing to purchase in a given time is called the demand.

(h) Frequency of Demand: It refers to number of demands in a period of time. For instance, the frequency of demand for new year greeting cards is only once in a year and that of birthday cards is many times.

(i) Behaviour of Demand: It refers to the nature of demand (seasonal or throughout the year) over a period of time.

(j) Lead Time: It is the period in days between the ordering and delivery of goods.

(k) Procurement or Ordering Costs: The cost incurred on acquisition of goods from the time an order is placed until goods are delivered at the company’s store is called procurement or ordering cost. It includes the cost incurred on purchase requisition activities, follow up routines/reminders, receiving of goods in store, inspection of goods, placing of accepted goods in store and return of rejected goods.

(l) Per-unit Procurement Cost: The per unit cost of procuring materials while ordering them in small or bulk quantities is called per-unit procurement cost. It is generally high for small orders and less for bulk orders.

(m) Inventory Carrying Cost: The cost incurred on holding the raw materials or finished goods in store until they are sent for production or sold respectively is called inventory carrying cost. It may include the warehouse cost (rent, etc.), lighting/heating/refrigeration cost, labour cost, obsolescence/ depreciation cost, insurance cost and interest cost on money invested in inventories.

(n) Stock-out Cost: The cost incurred on running out of stock of a material is called stock-out cost. For instance, if a certain item is out of stock, then it may either lead to backorder or cancel order situations. In case of backorder situation, only some cost incurred on extra communications with customer but if order is cancelled, the cost incurred would be much more due to loss in sale and goodwill of the company. Stock-out cost is generally very difficult to measure.

(o) Economic Order Quantity (EOQ): The optimum quantity of ordering materials that minimises the procurement cost, inventory carrying cost and stock-out cost is called economic order quantity.

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(p) Reorder Level: The level of inventory of a material at which an order is placed so that it is not run out of stock is called reorder level.

Methods of Inventory Control

Having understood the basic inventory terminology, we are in a position to discuss various methods of inventory control. The major objectives of an inventory control method are:

to determine the time when an order has to be placed for a particular item;

to determine the quantity of an item to be ordered.

The common methods used to achieve the above objectives are described below:

(a) Periodic Inventory Method: In this method, a fixed quantity of an item is ordered at regular or periodic intervals (such as a week, a month, an year, etc.) based on its consumption during last few periods. As this method is simpler than others, it is mainly used in manual inventory control systems. This method has a major drawback that if the consumption of an item decreases in a period, its inventory becomes over-stock. Therefore, this method is not recommended for computerised systems.

(b) Perceptual Inventory Method: In this method, an item is ordered when its inventory reaches at the reorder level calculated as follows:

Reorder Level = (Average Daily Usage X Lead Time in days) + Buffer Stock

Total quantity of an item consumed/ sold during last year

where, Average Daily Usage = ———————————————— No. of working days

Buffer stock is the extra inventory that must be present always in order to avoid the possible stock-outs due to increase in either daily usage/ lead time or both.

In perceptual inventory method, a fixed quantity of item called an economic order quantity is ordered at the reorder level. So, this method is also called fixed quantity inventory method. The Economic Order Quantity (EOQ) is the most economic point when the inventory carrying cost is equal to the ordering cost and is calculated as follows:

2DAEOQ = Square Root of ————

CI

where, D is the demand (total annual quantity);

A is the ordering cost per order;

C is the cost of an item;

I is the inventory carrying cost (percentage of the value of average inventory).

Perceptual inventory method is more reliable than periodic inventory system and is generally used in computerised inventory control systems.

Classification of Inventory Items

The inventory of all category of items cannot be determined by using same method. This is because each type of item is consumed in different quantities in different situations. Some items are consumed very less,

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some in very large quantity and some in an average quantity. Some raw materials are very essential, some less essential and some are not at all essential for production of a finished good in a manufacturing firm. Therefore, the inventory items are classified into various types based on following analytical techniques:

(a) ABC Analysis: (ABC stands for Always Better Control.) This analytical technique for classification of inventory items was first introduced by an American firm – General Electric Company. According to this analysis, there are three categories of inventory items – (i) A type; (ii) B type; and (iii) C type of items depending upon their percentages of consumption. The differences between these types of items is summarised in Table 5.3.

Table 5.3: Differences between A, B and C Type of Items

Criteria A type B type C type

Quantity 10% 20% 70%

Annual Usage 75% 15% 10%

Control Very Strict Moderate Less

Ordering Daily/Weekly Bimonthly Yearly

Safety Stock Less High Highest

(b) VED Analysis: (VED stands for Vital, Essential and Desirable items. This technique analyses the essentiality of a raw material for production.) According to VED analysis, there are following three categories of items –

(i) V type of items: Vital items that are very critical for production.

(ii) E type of items: Essential items that are not critical but are always required for production.

(iii) D type of items: Desirable items that can go out-of stock because they are not essential for production.

(c) FSN Analysis: Some inventory items are consumed more and some less. According to FSN analysis, items are classified into following three types depending upon their speed of utilisation:

(i) F type of items: Fast-moving items that were consumed faster than others in the past.

(ii) S type of items: Slow-moving items that were consumed slowly in the past.

(iii) N type of items: Non-moving items that were either not or extremely less consumed in the past.

Typical Inventory Control System

The major objectives for implementing a computerised inventory control in an organisation are:

Maintaining an optimum level of raw materials and finished goods inventory;

Preparation of purchase orders and inventory status reports accurately and on time;

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Preparation of various analysis reports;

Generation of MIS reports that help management for making effective and timely decisions.


Data of suppliers, vendors and buyers including code, name, address and other details of each supplier, vendor and buyer.

Data of raw materials and finished goods including code, name, category, size, price and other details of each item alongwith their quantity.

Goods Received Note (GRN) indicates the quantity received of various items along with other details.

Materials Requisition Slips indicate the quantity issued of various items to production department or vendors alongwith other details.

Delivery Challans indicate the quantity sold of various items to buyers alongwith other details.

Materials Rejection Note indicates the quantity of items rejected to vendors/suppliers alongwith reasons of rejection.

A typical inventory control system is illustrated in Figure 5.3. It generates the following outputs:

i) Purchase Order includes P.O. No., P.O. Date, supplier name, address, item code/name, category, quantity ordered, price, amount alongwith terms and conditions.

ii) Purchase Book includes the quantity and other details of items received.

iii) Inventory Status Reports (Detailed and Summary) includes the quantity and other details of items sold, received, issued and rejected along with their closing balance.

iv) Materials Return Report indicates the quantity of items rejected along with other details.

v) Materials Transfer Report indicates the quantity of items issued to other branches/departments along with other details.

vi) Purchase Analysis Reports (Supplier and Item wise) indicates the quantity and other details of items purchased during a period from various suppliers.

vii) ABC, VED and FSN Analysis Reports classify inventory items on different criteria.

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Figure 5.3: A Typical Inventory Control System

Marketing Systems

The importance of the information systems for the purpose of marketing can be better realised by understanding the meaning and role of the marketing function in a business process. Marketing is a strategic as well as an analytic process that aims at identification of customer requirements; commits to produce, sell and service to the satisfaction of the customer and is responsible for the financial growth of the business. A well known management scientist Kotler has suggested that the starting point of discipline

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of marketing lies in two basic factors namely human needs and wants. Kotler elaborates: ‘A human need is a state of felt deprivation of some basic satisfaction. Human wants are desires for specific satisfiers of these deeper needs....Marketers do not create needs, needs pre-existing marketers. Marketers, along with other influentials in the society, influence wants.’

Concept of Marketing

The concept of marketing encapsulates the following aspects :

Develop products or services that aim exclusively towards satisfaction of the consumers’ wants.

Establish ways of communication with the existing as well as the potential buyers to convey the benefits of the offered products or services.

Ensure that the consumer is always satisfied with the offered products or services so much so that he repeatedly buys the products in the future.

Collate data on the regular feedback from the consumers about the product and services. Accept, respect , analyse and act on the basis of consumers’ feedback to improve upon product line as per the consumers’ perspectives. This data may be utilised to research for more marketing avenues, modifications in the product line as per the demands of the consumers and new product developments.

Though marketing and sales functions go hand in hand in most of the organisations, there lies a subtle difference in the concept of marketing and selling. (Selling function evolves upon the sellers’ instinct to convert their manufactured goods or services into cash.) The quality of sale depends upon the volume of cash transacted.

(Marketing function includes the whole process of activities associated with a strategy aimed at customers’ satisfaction).

These activities include marketing research to ascertain

what to produce and of what quality,

whom to target as prospective buyers,

how to retain existing customers and increase the customer base and

how to tackle competitors.

The marketing concept emphasises the company’s commitment to the consumer sovereignty. The production of the company is solely based on what customer wants. The aim of the company production and distribution of the products relegates to two fold objectives: how to maximise customer satisfaction plus how to earn and sustain profits.

Terminology of Marketing

Having understood the concept of marketing, we discuss the terminology associated with marketing function. Most commercial organisations deal in a group of products that are closely related because of having similar characteristics or being sold to similar type of customers. These group of similar type of products are referred to as a product line. For example, Cars may be one of the product lines of a company engaged in the automobile manufacturing. The product mix is the choice of the company to maintain a portfolio of products which satisfies customer needs and wants, maximise profitability and make the best use of the skills and resources of the company. Product mix analysis is an important marketing activity that leads to an analytical decision as to which are the products that are to be added to existing portfolio of products and which are the products whose production has to be removed from the product line in order to optimise the company’s profitability.

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A brand is the name, design or logo which identifies the product line, product or service of a manufacturer or a service provider such that buyer is able to distinguish amongst the similar products as offered by various competitors. For example, Microsoft Office 97 is a brand name of office systems oriented software that is distinguishable with Lotus Office smart suite or Corel Office suite though these provide similar functionality in the product line. An information system user has a choice to opt for any of these information systems according to his needs and preferences. This book has been published by Excel Books which is a brand name that can be distinguished from another publishing brand say Sybex Inc. Marketing function aims to build a brand image for a product or a service in the consumers’ or the clients’ minds. Establishment of a brand image leads to a brand identity in the marketplace.

Traditionally, this process of building image and identity is through a series of one way communications from a company to the consumer or the client. In this context, the company may be referred to as the supplier of product or services whose goal is to manufacture and supply the goods or provide services according to the demands of the consumers, customers or the clients. The one way communication is through advertisement that may include television, radio or newspaper, brochure, to create awareness in the minds of consumers. Lately, internet web sites provide a two-way communication between the company and a customer by seeking instantaneous feedback and response to customer query on the fly.

(The advertising function aims at fostering brand awareness, appropriate brand positioning and building of the brand image.) In context of advertising, an important function of a marketing manager is media planning. Media planning leads to advertiser’s media budget that has to be formulated taking into optimum utilisation of company resources to react to the target market most effectively. Brand preference refers to consumers’ preference of a particular brand amongst the available alternatives in the marketplace. A robust brand preference of the consumers ordains a level of pricing of the product that may exceed commodity levels depending upon the state of the marketplace. The state of market place depends upon two factors. If the demand of the product exceeds the level of supply then the market place is the sellers’ market. If the customer has a choice to choose from many readily available brands and there is no shortage then the state of the market place is known as buyer’s market. Brand loyalty is the measure of repeat purchasing of a product or a service. Increased brand loyalty results in lower cost of selling. Brand equity is measurable from increase in margins due to brand preference and brand loyalty. The goal of every commercial organisation is to maximise the brand equity.

Typical Marketing Strategies

Most common marketing strategy is based on target marketing. (Target marketing is a process to segregate the customer base into the varied groups with varied tastes and preferences and develop the appropriate products and product-mix exclusively on choice of these groups.) There are mainly three elements of target marketing namely, market segmentation, market targeting and product or brand positioning. The market segmentation is based on product preferences of a group of consumers. The inference of market segments is drawn on the basis of:

Demands by customers group in terms of quality, durability, prestige and economy;

Demography, regional, religious, cultural, social classes (upper, middle, lower), life styles;

Buying behaviour constituting readiness and frequency of buying, degree of brand loyalty and degree of awareness of a customer group.

Market targeting is a strategy drawn to identify which segments of market provide the best opportunity for the company. This enables a marketer to concentrate on market segments heuristically. Brand positioning is

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a strategy to distinguish the company brand with the brands marketed by the competitors such that it becomes the most preferred brand in the marketing segments.

A pragmatic approach to the process of marketing is brand immersion. A marketing manager follows brand immersion by seeking the mission of his organisation and the state of mind of the prospective customers. The marketing manager peruses the papers on marketing research, studies the intricacies and impact of existing advertising drive of the company and his competitors by going through the television commercials, brochures, billboards, Internet web sites, etc. and gathers the moods of market by himself pretending to buy. This exercise of brand immersion is essential to understand the current standing of the brand in the market and drawing a preliminary marketing plan.

Typical Marketing Information Systems

(Marketing information systems are required to assist the management in decision making about pricing of products, packaging, new product development, product-mix analysis, advertising, product promotion policy, sales strategy, inventory control and production schedule.) We would discuss the marketing and sales related information systems synergistically because both marketing and sales functions are mutually interrelated and a typical scenario in an organisation set up today place marketing and sales department in one box.

Traditionally, marketing/sales manager used periodic sales reports as yardstick to measure the performance of sales process in various market segments and evaluate marketing systems. This system lacked flexibility, timeliness and decision support information because of its clerical approach and delays. Gradually, these traditional sales reporting system needed to be upgraded to online decision support system to provide the necessary strategic, tactical and operational control for all levels of the management. The significance of such system is that these systems are online and therefore feedback to the executives is instantaneous. The marketing executives can take immediate remedial steps if they find any deviation in terms of sale values or quantity. The consistent monitoring of the marketing systems enables flexible budgets, strategic plans and effective tactical and operational control. Most marketing systems are designed as an inquiry or feedback forms that provide inputs to marketing planning, control and marketing research. Typical formats of the inquiry or feedback forms may be computerised and preferably networked internally within the marketing office and externally with the remote logistics and marketing centres. Technically facilities of telecommunication network like leased lines, V-SAT, intranet, etc. may be used over a well defined marketing communication system. The choice of this networking solution should be taken after conducting a proper feasibility, cost-benefit and technical analysis study because such systems are expensive. Ideally, the marketing information systems should incorporate the basic formats described as follows :

1) Performance analysis is based on sales summary to date compared with past periods, budgets and other standards. Typical areas of performance analysis include total sales by product/region/personnel, sales and marketing expenses, profitability analysis, sales cancellation reports, etc.

2) Analytical reports are the exception reports providing in-depth analysis and are derived from the performance analysis reporting system. These include typical summarised reports on sales by brands, sales by industry, sales by customer type, sales by region, etc. These also include trend analysis and ratio analysis such as sales turnover to sales expense, total sale of a product to total industry sale of the product, etc.

3) Inquiry system is an important marketing control system that enables a marketing or sales executive to retrieve answers to the specific queries about sales performance of a particular brand in a particular market segment, performance of sales personnel based at particular region and similar

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numerable queries providing a bird’s eye view on trends, problems and possible marketing opportunities.

4) Credit and discounting system is a part of financial and marketing control systems that assist in planning of a credit and discounting policy for various market segments based on information about sales volume in terms of value and quantity, efficiency of the distribution system , level of competition and the condition of the demand and supply environment in the market. One of the major responsibility of a marketing manager is to ensure the smooth recovery of the sales proceeds by strengthening the credit and recovery system, monitoring carefully the old outstandings and taking steps to formulate credit limits for the customers.

These formats for information system may vary to some extent from organisation to organisation as per the perspectives of the management, needs and status of a organisation. The general marketing information system is illustrated in Figure 10.4 for reference. A typical synopsis on marketing systems and their applications is given below:

i) Marketing research

Applications

-Advertisement strategy

-Pricing policy

-Marketing strategy

Inputs

based on external data collated from the industry primarily constituting sales performance analysis of a variety of brands in various market segments of various companies;

industrial infrastructure, marketing, production strength and weakness;

industrial advertising drive and impact;

industrial pricing policy and consequences;

internal data compiled in the company constituting sales performance analysis of a variety of brands of the company in various market segments;

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Figure 5.4: A Marketing Information System

strategic marketing attributes and forecasts data versus actual sales performance data;

advertising budget and actual spending;

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infrastructure budgets;

prices of products and sales figures.

Outputs

Intensive reports on industry wide sales performances;

Inferences of results compared to forecasts with respect to past marketing strategy, advertising and pricing policies;

Review of marketing strategy, advertising and pricing policies;

Market share of the company.

ii) Marketing planning

Applications

-Forecasts

-Purchasing strategy

-Production plans

-Market segmentation

Inputs

Summarised data from market research;

Outputs

Review of sales forecasts;

Product-mix strategic reports;

Market-mix strategic reports.

iii) Sales analysis

Applications

– Sales performance

– Invoicing

– Marketing plans

– Production plans

Inputs

Sales data by region/product/personnel in terms of value and quantity;

Projected sales data by region/product/personnel for comparison with the actual sales;

Sales data customer wise with the transaction data for invoicing system.

Outputs

Sales reports region/product/personnel in terms of value and quantity;

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Variance analysis on actual sales versus projected sales.

iv) Marketing control

Applications

- Marketing costs

- Credit management

Inputs

Sales data of various products of a company;

Marketing expense data;

Summarised output of sales analysis constituting sales performance data personnel/region/product wise;

Sales transaction data from invoicing and sales systems.

Outputs

Variance analysis on costs : budgeted versus actual costs;

Age analysis of the outstandings of sundry creditors;

Tactical reports on desirable and undesirable trends.

The marketing world is becoming increasingly competitive by each passing day. The computer and telecommunication technology is improving and becoming affordable in rapid strides. Therefore, the marketing information systems are also consistently improving and transforming the traditional sales report system into a communication process that integrates all the primary subsystems viz. sales, production, human resource, logistics and finance.

Emerging Trends in Marketing Systems

(Today, networking technologies such as the Internet and World Wide Web (WWW) have revolutionized the mode of global communication.) The Internet is gradually emerging as one of the most promising means of marketing products or services by virtue of its provisions that lend interactivity and interaction between the supplier of products or services and the prospective consumer. The prospective customers access the web sites of the supplier company on the Web and submit query or order the product directly from his remote computer terminal. He may interact with the company by use of Electronic Mail and get auto-responded e-mail message or be responded personally for his specific query by the marketing department of the supplier company right in his machine.

The prospective customer using Web may surf to different Web Sites of the companies dealing in same products and strike the best bargain not moving from his premises. He may pay via his credit card on the Internet itself for his purchases. This concept of transactions is getting popular and is being known as Electronic commerce. The supplier company may also decide to create their own intranet connecting their regional offices spread globally. This enables to install a robust inter-company communication system whose advantage is that the particular regional query of a potential customer need not wait to be addressed but routed to other world wide offices for instantaneous solutions. These provisions offer a novel approach to transcend the non-interactive staccato of the traditional brand image building marketing activities.

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Chapter-13

Human Resource Development Systems

Ever since the organisations had been involved in some activity, the human being working there as employees are continued to be considered as valued assets. This is the reason for relevance of human resource management just like any other resource management. Organisational effectiveness and efficiency, growth of business, sustenance of competitive advantage can be attributed to the development of an appropriate corporate culture within an organisation by integrating business and human resource strategies. HRD management emphasises on optimum utilisation of human resources by formulating consistent and coherent policies aimed at promoting commitment to the organisation. This commitment of employees yield optimum level of efficiency from them and unleash a wave of creativity in the midst of the working environment which is less compliant and most confident of the human resource.

Traditionally, information systems for HRD had been restricted to personnel management systems whose purview include recruitment, placement, training and development, compensation and maintenance. Human resource development systems have extended these personnel systems to incorporate ties of these traditional functions with other major systems of organisation viz. marketing, finance, production and inventory control. Justification of above incorporation lies in the fact that human resource is a common element in all the existing subsystems within an organisation. Having understood the importance of HRD systems in an organisation it is not too difficult to perceive that HRD systems should have involvement of top level management in persistent human resource planning. This planning is imperative to boost quality of people the company needs in present and future scenario linked with productivity plans.

Human Resource Planning

Human resource planning is governed by the demand and supply forecasting techniques to identify he current and the future human resource requirements of an organisation (Refer Figure 5.5). Demand forecasting is an estimation of future requirements in human resources in number and quality. Generally, the basis of the forecast is the annual budget that is translated into activity levels for various management functions. The popular techniques used in demand forecasting are work analysis and ratio analysis. Work analysis initiates with the information on estimated saleable products or budgeted volumes of output for individual departments. This information is drawn from the project budget or the annual corporate budget. On the basis of the above information the productive hours are compiled in a project. The productive hours yield information on estimation of direct labour requirement or number of permanent employees. For example, suppose in a manufacturing company the planned output for a year is 60000 units. Standard working hours for a unit output are 15 hours. Then planned hours for work in a year are 60000x 15= 9,00,000 hours. Let the productive hours per worker in a year be estimated as 4000 hours. Then the number of direct labour involved in production is estimated as 900,000/4000=225. Thus, activity level forecast is used to determine the direct labour requirements. Ratio trend analysis is accomplished by employing past ratios, say, the number of direct and indirect workers in similar projects. In this analysis considerations on changing methodology of management style and past experience is also taken as a factor. Further cost/benefit analysis combined with ratio trend analysis yield the estimation of indirect labour requirement of non permanent employees or consultants sourced from outside the organisation. Supply forecasting estimates the number of people that shall be available from within and outside the organisation taking into consideration estimated absenteeism, wastage of time or other internal and external environmental factors.

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Figure 5.5: Human Resource Planning System

Human Resource Information Systems

Since the scope of human resource management continues to transcend the trivial personnel managerial functions it would be appropriate to discuss the HRD information systems classified as typical personnel management information systems and human resource management information systems.

Typical Personnel Management Information Systems (PMIS)

PMIS are traditional operational management based systems that undertake the data processing of routine personnel activities such as payroll and employee personnel data constituting address, marital status, rank, department, employment histories, vacation, leave records, qualifications, skills, special assignments, training undertaken, increment or promotion with due date, performance grade, etc.

The importance of PMIS cannot be undermined considering the volume and intricacy of payroll data processing and wide scope/ variations in general reports required for day to day personnel management. Computer based payroll systems generally run on batch processing mode. A batch run is used to generate payslips and print cheques by processing the whole of data needed for the purpose, periodically. The payroll system works on the salary structure of the employee, his leave records and generates gross pay of

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employee by making appropriate deductions, adjustments or additions on account of loans, tax, insurance, provident fund, superannuation fund, conveyance, overtime or any other relevant data. This data is generally available in different files of payroll database system and is linked with a key field known as employee code. Besides payroll, PMIS constitutes integrated operational information system that contains all activity based and remuneration based information pertaining to the employee such as leave record, performance grading, perks and allowances entitlement, other confidential reports, appointment letter documents, etc.

Human Resource Management Information Systems (HRMIS)

Consideration based on an employee as a resource ordains human resource planning by the HRD management in consultation with the top management. HRMIS are primarily based on the requirements of human resource planning. The scope of HR management includes work design, recruiting, performance analysis, reward and motivation plan, work evaluation, salary structure design, employees’ skill analysis and systematic training. The work design includes decisions on the content of a particular job in an organisation in terms of techniques, systems and procedures. There is a need to maintain data on particulars of the jobs, duties, responsibilities and interrelationships of the tasks force and the skills. A typical information system that has gained importance may be referred to as skill inventory information system or human resource assessment bank. The objective of such information system is to identify the talent resources of the organisation to optimise its effective use. This information system includes a computer simulation work force model. The simulation technique is used to evaluate alternative human resource plans such as new recruitment, transferring, retraining, project feasibility, etc., under various human resource management approaches.

Another significant human resource information system is salary control information system. The salary control information system ensures that the salary policies of the company are implemented in such a way that the salary costs remain within a limit of the human resource budget. The human resource budget is a product of number of employees to be recruited or maintained and the rates at which they are to be paid over a budget year. The genesis of the human resource budget is based upon the salary surveys in the industry, human resource plans, present salary levels and the forecasts of additional costs arising from general and individual salary reviews. This budget relies upon the current business held by the company and the forecast of the additional business projected to be garnered by the company by the diversification or the marketing plans. The salary control information system provides a system of salary audit. The salary audit ensures that the salary levels are in direct correlation with the ever fluctuating market rates in the industry. The external data from the industry is required to be compared with the internal data of the salary structure within the company. A salary control ratio suggesting how far the average salary for a grade in an organisation vary from the industry average may be calculated. For example, if (Average of all salaries in a grade)/(Average salary of the industry for the same grade) is equal to 1 then the distribution of the salary may be considered on target. Otherwise, if this ratio is less than or greater than 1 then such case ordains a proper study to justify or correct such variation. The appropriate differential without much discrimination ought to be maintained between the new staff and the old staff. The salary progression policy has to be formulated such that unjustifiable upgradation in the salary or the position of a particular segment of staff or individual may not erode the motivation of the majority of the staff. The other decisional aspect that salary control system is supposed to inspect is the phenomenon known as salary attrition. Salary attrition occurs as the number of new recruits join at a lower salary than the number of old staff leave the company

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so that the salary costs over a period are maintained at a budgetary level subject to overall regular increments. The attrition measurement in terms of retaining merit in relation to a salary financing system is a high level decisional area. The salary control information systems should be designed to assist decision making in the forecast of future expenditure on salary and access the actual costs incurred by the company on account of attrition.

Scope and Trends in Human Resource Management

The ultimate aim of human resource management is manifold. Most significant aspect of HRM is the management development in particular, improving upon all round skills of the staff and motivating them for optimum performance in general. The information systems are needed to build to assess the performance of each employee in relation with their key objectives and responsibilities. Most information systems for human resource management provide a system of organisation review, human resource review, performance appraisals, management skill inventory and training schedules. These are the important decisional support systems that most of the top line managers rely upon for strategic planning and tactical and operational control.

Macro Level Information Systems

There are six major types of Information Systems:

(i) Executive Support Systems (ESS)

(ii) Management Information Systems (MIS)

(iii) Decision-Support Systems (DSS)

(iv) Knowledge Work Systems (KWS)

(v) Office Systems

(vi) Transaction Processing Systems

(i) Executive Support Systems (ESS): Executive Support System are used by Senior managers to make decisions ESS serve the strategic level of the organization. They address non-routine decisions requiring judgement, evaluation, and insight because there is no agreed-on procedure for arriving at a solution ESS create a generalized computing and communication environment rather than providing any fixed application or specific capability. ESS are designed to incorporate data about external events such as new tax laws or competitors, but they also draw summarized information form internal MIS and DSS. They filter, compress and track critical data, emphasizing the reduction of time and effort required to obtain information useful to executives. The most advanced graphics software can be employed by ESS. ESS can also deliver graphic and data from many sources immediately to a senior executive’s office or to a boardroom.

Instead of solving specific problems, ESS provide a generalized computing and telecommunications capacity that can be applied to a changing array of problems. ESS tend to make less use of analytical models.

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Figure 5.6: Model of a typical executive support system. This system polls data from diverse internal and extenral sources and mkes them available to executive in

an easy-to-use form.

ESS assists in answering the following questions:

What business should we be in?

What are the competitors doing?

What new acquisitions would protect us from cyclical business swings?

Which units should we sell to raise cash for acquisitions?

Since ESS are designed to be used by senior managers who may have little direct contact or experience with computer-based information systems, they incorporate easy-to-use graphic interfaces.

Beneifts of ESS: ESS is very flexible. These systems put data and tools in the hands of executives without addressing specific problems or imposing solutions. Executives are free to shape the problems a necessary, using the system as an extension of their own thinking processes.

The most visible benefit of ESS is their ability to analyze, compare, and highlight trends. The easy use of graphics allows the user to look at more data in less time with greater clarity and insight than paper-based systems can provide.

Executives are using ESS to monitor performance more successfully in their own areas of responsibility. Some companies are using these systems to monitor key performance indicators for the entire firm and to measure firm performance against changes in the external environment.

A well-designed ESS could dramatically improve management performance and increase upper management’s span of control. Immediate access of so much data allows executives to better monitor activities of lower units reporting to them.

ESS based on enterprise-wide data could potentially increase management centralization, enabling senior executives to monitor the performance of subordinates across the company and direct then to take appropriate action when conditions change.

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(ii) Management Information Systems (MIS): (Management Information Systems can be defined as the study of information systems in business and management.) MIS serve the management level of the organization providing managers with reports and, in some cases, with online access to the organization’s current performance and historical records.

MIS primarily serve the functions of planning, controlling, and decision making at the management level. Generally, they depend on underlying transaction processing systems for their data.

MIS summarize and report on the company’s basic operations. The basic transaction data from TPS are compressed and are usually presented in long reports that are produced on a regular schedule.

Figure 5.7: How management inforamtion sytems obtain their data from the organization’s TPS. In the system illustrated by this diagram, three TPS supply summarized transaction data at the end of the time period to the MIS reportign

system. Managers gain access to the ogranizational data throught the MIS, which provides them with the appropriate reprots.

MIS usually serve managers interested in weekly; monthly, and yearly results – not day-to-day activities. MIS generally provide answers to routine questions that have been specified in advance and have a predefined procedure for answering them. Most MIS use simple routines such as summaries and comparisons, as opposed to sophisticated mathematical models or statistical techniques.

Stage of Growth of MIS

It is pertinent to realise the importance of growth of MIS in stages in order to encounter increasing complexity of business processes and changing scenario of management. MIS development evolves from EDP systems. The EDP systems have rudimentary technology to handle clerical and supervisory operations in an organisation. This is initiation stage. The advantages of computerisation are gradually realised by most of the people in an organisation. This realisation leads to proliferation of computer, networking technologies and computer based system applications within an organisation. This is contagious stage. Next stage is typified by planning and control. As demand for computerisation increases, a need is realised for cost-benefit analysis. This is imperative to plan for future MIS in a cost effective manner.

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Next stage of MIS development is integration of subsystems. This comes with realisation of interdependence of inflow of data from various sources for valid information. Management plans to leverage existing subsystems to a unified system. Objective of a unified system is to obliterate data redundancy and facilitate communication of information amongst various departments. After creation of an integrated system, management focuses its attention to database administration. Here impetus is on regulating data for company wide communication. This stage is also referred to as architecture stage. Next to data administration stage an organisation reaches a stage of MIS maturity. This is the state when MIS department is geared up to plan future MIS needs for the organisation. MIS department future development plans emanate for feedback of the users of existing MIS. At this stage, users are in complete control of MIS and become aware of their system needs. (Refer Figure 5.8)

Figure 5.8: Stages of Growth of MIS

(iii) Decision-Support Systems (DSS): (Decision-Support Systems help managers make decisions that are unique, rapidly changing, and not easily specified in advance.) They address problems where the procedure for arriving at a solution may not be fully predefined in advance.

By design, DSS have more analytical power than other systems. They are built explicitly with a variety of models to analyze data, or they condense large amounts of data into a form in which they can be analyzed by decision makers. DSS are interactive; the user can change assumptions, ask new questions, and include new data.

‘Decision-support’ is a phrase that has been bandied around for some time now and is usually linked with AI (Artificial Intelligence). Basically getting the computer to attempt to carry out some of the processing that the user does when converting the data (‘facts’) into information (‘clinically relevancy’). The section on Inforamtion and Knowledge discusses this in depth and should have

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possibly reduced your expectation as to what computers can actually provide with regard to ‘decision support’.

Most people consider a decision support system to offer one of three levels of support:

Presents the data in a way conducive to cognitive processing by sorting, classifying, flagging etc. Thus facilitating decision making by the user. For example presenting a list of drugs for asthma rather than just a list of drugs for all conditions.

Provides the results of some data manipulation. Here the system mimics part of the cognitive process e.g. provides a list of drugs only suitable to treat Asthma in an 8 year old who has no other illness.

Provides the results of some data manipulation and carries out some appropriate action. Here the system mimics more of the cognitive process as well as the output processes e.g. system prescribes drug and arranges next appropriate appointment.

A large number of applications (pieces of software) can be considered to be ‘decision support systems’ at the lowest level described above A reference manager, electronic diary, statistical package and an online library catalogue all fulfil the criteria, and incidentally are all databases. In contrast the Internet without some type of filter and a word processor are not?

(iv) Knowledge Work Systems (KWS): Knowledge work systems serve the information needs at the knowledge level of the organization. Knowledge work systems aid knowledge workers, people who hold formal university degrees and who are often members of recognized professions such as engineers, doctors, lawyers and scientists. Their jobs consist primarily of creating new informational and knowledge. They ensure that new knowledge and technical expertise are properly integrated into the business.

(v) Office Systems: Office systems primarily aid data workers. Data workers typically have less formal advanced educational degrees and tend to process rather than create information. They consist primarily of secretaries, book keepers, filing clerks, or managers whose jobs are principally to use, manipulate, or disseminate information.

Office systems are information technology applications designed to increase data worker’s productivity by supporting the coordinating and communicating activities of the typical office. Office systems coordinate diverse information workers, geographic units, and functional areas. They systems communicate with customers, suppliers, and other organizations outside the firm and serve clearing houses for information and knowledge flows.

Typical office systems handle and manage documents through word processing, desktop publishing, document imaging, and digital filing, scheduling through electronic calendars; and communications through electronic mail, voice mail, or video-conferencing.

(vi) Transaction Processing Systems: Transaction processing systems are the basic business systems that serve the operational level of the organization. A transaction processing system is a computerized. A transaction processing system is a computerized system that performs and records the daily routine transactions necessary to conduct business. Examples are sales order entry, hotel reservation systems, payroll, employee record keeping, and shipping.

At the operational level, tasks, resources, and goals are predefined and highly structured. The decision to grant credit to a customer, for instance, is made by a lower-level supervisor according to predefined criteria. All must be determined is whether the customers meets the criteria.

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Figure 5.9: A Symbolic Responsabities for a Payroll TPS

Transaction processing systems are often so central to a business that TPS failure for a few hours can spell a firm’s demise and perhaps other firms linked to it.

(Managers need TPS to monitor the status of internal operations and the firm’s relations with the external environment.) TPS are also major producers of information for the other types of systems.

TPS supplies data to the company’s general ledger system, which is responsible for maintaining records of the firm’s income and expenses and for producing reports such as income statements and balance sheets.

Figure 5.10: The six major typesof information systems. This figure provides examples of TPS,

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office systems, KWS, DSS, MIS and ESS, showing the level of the organization and business function that each supports

Brief Summary of the Topic

So after going through this chapter we can summerise the concepts.

Accounting is mainly concerned with the collecting, recording and evaluating the financial date and communicating information to the management and other people.

The revenues earned in an accounting period are matched with the expenses incurred on generating those revenues. This concept helps to measure the profitability on the sales/services made during an accounting period.

Trial Balance is a list or financial statement prepared monthly, quarterly or annually to find out the balance of each account.

A typical accounting information system includes Financial Accounting, Cost Accounting and Management Accounting Systems.

An inventory control system ensures that proper stock levels of each item are maintained.

ABC stands for Always Better Control.

VED stands for Vital, Essential and Desirable items. This technique analyses the essentiality of a raw material for production.

Marketing function includes the whole process of activities associated with a strategy aimed at customers’ satisfaction.

Selling function evolves upon the sellers’ instinct to convert their manufactured goods or services into cash.

The advertising function aims at fostering brand awareness, appropriate brand positioning and builders of the brand image.

Target marketing is a process to segregate the customer base into the varied groups with varied tastes and preferences and develop the appropriate products and product-mix exclusively on choice of these groups.

Marketing information systems are required to assist the management in decision making but pricing of products packaging, new product development, product-mix analysis, advertising, product promotion policy, sales strategy, inventory control and production schedule.

Today, networking technologies such as the Internet and World Wide Web (WWW) have revolutionised the mode of global communication.

HRD Management emphasises on optimum utilisation of human resources by formulating consistent and coherent policies aimed at promoting commitment to the organisation.

Management Information Systems can be defined as the study of information systems ion business and management.

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Decision-Support Systems helps managers make decisions that are unique, rapidly changing, and not easily specified in advance.

Managers need TPS to monitor the status of internal operations and the firm’s relations with the external environment.

Self-assessment Exercises

1. How does an accounting information system satisfy the information needs of management and other people?

2. Describe the basic accounting concepts about which the managers must be aware.

3. Define the following terms of accounting:

(a) Working Capital (b) Equity (c) Debtor

(d) Double Entry Accounting (e) Liability (f) Revenue

4. Differentiate among three types of accounts alongwith suitable examples.

5. List the major types of account books and financial statements.

6. Describe the inputs and outputs of a typical accounting information system. How does the system help managers?

7. Discuss the importance of computerized information systems for human resource development.

8. Differentiate among HRD, PMIS and HRMIS with suitable examples.

9. Describe the importance of various types of human resource information systems for an organisation.

10. Define the following terms of inventory

(a) Lead Time (b) Behaviour of Demand

(c) Ordering cost (d) Reorder level

11. Describe the common methods used to determine the time when an order has to be placed and the quantity of an item to be ordered.

12. Differentiate among ABC, VED and FSN analytical techniques used to classify inventory items.

13. What are the major objectives of a computerized inventory control system? Describe the inputs and outputs of a typical inventory control system.

14. Describe the common methods used to determine the time when an order has to be placed and the quantity of an item to be ordered.

15. Differentiate among ABC, VED and FSN analytical techniques used to classify inventory items.

16. What are the major objectives of a computerized inventory control system? Describe the inputs and outputs of a typical inventory control system.

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mis notes

Documents

financial accounting

accounting transactions

accounting purposes

accounting practices

information systems

b management accounting

c cost accounting system

basic concepts of accounting