MIS390:
Lesson 2: Types of Information Systems
Introduction | Video
Watch Video 2.1, which describes how self-service kiosks enable fast-food restaurants to automate the ordering process.
SPEAKER: Sintel System's self-serve kiosk allows customers to place orders and pay for them right on the kiosk. Orders are then sent directly to the kitchen increasing efficiency and accuracy. With the ability to instantly change to 15 different languages, local and international customers can be confident that Sintel's kiosks will meet and beat all of their needs.
To start, select Eat in or Take out, which opens the main menu with all categories on the top. Simply select the main item followed by associated modifiers. Choose Sides, Drinks, and Desserts next.
Items ordered are continuously added and displayed on the bottom. Move to complete the order by selecting Payment. The built in EMV chip card technology eliminates the need to additional bulky pin pads. Once the order is complete, it is sent directly to the kitchen and ready within minutes. With a [? 2D ?] built in printer, barcodes and QR codes can be scanned quickly as well. Under Sintel Systems, all inclusive technical support kiosks are delivered fully pre-configured and ready to go.
[MUSIC PLAYING]
Information systems are used by firms to manage information, enhance decision-making, and also to improve the execution of internal business processes. To achieve these goals, organizations use a variety of information systems, enterprise applications, and social business applications across different organizational levels (e.g., operational, managerial, and strategic).
Critical Thinking 2.1. Can you identify any business processes involved in using a self-service kiosk at a fast-food restaurant?
Learning Objectives
After completing this lesson, you should be able to do the following:
- Describe the relationship between business processes and information systems.
- Identify and describe the different types of information systems that exist within an organization and explain how they serve different managerial groups.
- Evaluate systems for collaboration and social business, and explain the associated benefits.
Lesson 2 Readings and Activities
By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 2 Course Schedule.
Business Processes and Information Systems
In Lesson 1, we were introduced to the term business process. A business process is a set of actions completed to achieve a specific objective for the business, such as selling a product, hiring a new employee, or delivering a finished product to a customer. The success of a business process strongly depends on how well it's designed and coordinated. Business processes can occur within a single functional area or cross over different functional areas. However, business processes that cover different functional areas are called cross-functional business processes.
For examples of business processes in a single functional area, see Table 2.1 on page 44 of the textbook (Laudon & Laudon, 2020). For cross-functional business processes, see Figure 2.1.
Information systems are used to improve business processes. One way information systems improve business processes is through automation. Automation allows processes to be completed with little or limited human intervention. Refer to the initial case at the beginning of this lesson about using a self-service kiosk to fulfill a customer order. It's clear that automation is a key component in the order-fulfillment process.
In addition to automation, information systems improve business processes by reducing the amount of time it takes to complete a task. Information systems also give rise to new business processes, such as allowing customers to download music and pay bills online. Additionally, information systems change the way businesses operate by transforming their business model. For example, the way people apply for jobs today is a new model involving online searching and online applications. Another example illustrates how information systems have changed the way people acquire music today. Many individuals download music from sites such as iTunes or stream music through Pandora instead of going to a physical store to purchase a CD.
What Are the Different Types of Information Systems in an Organization?
In Lesson 1, you learned that the hierarchical structure of an organization consists of three different levels: operational, managerial, and executive. There are different information systems at each of these three levels. Further, there are information systems that cross multiple levels, which are referred to as enterprise systems.
Select each of the following different types of information systems.
Transaction Processing System (TPS)
- A transaction processing system (TPS) supports the operational level of the organization.
- A TPS keeps track of daily, routine transactions within the organization.
- Low-level managers at the operational level make decisions based on the data collected from the relevant TPS.
- A TPS usually has a high volume of data because this data is collected constantly on a daily basis.
Examples of Transaction Processing Systems
Tracking the time that employees arrive for and leave from work. Many companies use information systems for employee attendance. These can be in the form of a computerized punch card, a computer screen to log into, or a card that the employee swipes whenever entering or leaving the building (Figure 2.1).
Daily sales tracking. Daily tracking of all sales at a retail store is also accomplished with the use of a TPS (Figure 2.2). Companies can have a specialized software program that is used on their point-of-sale systems. This is an automated process that captures information about sales, and that data is stored as part of the TPS. This type of information system is a central part of the business, and data collected via the TPS is used to improve decision-making throughout many different aspects of the organization. For example, understanding daily sales over a long period will help identify customer purchase patterns. This information can provide valuable input for managers to determine how many, how frequently, and what type of products they need to reorder.
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Management Information System (MIS)
- A management information system (MIS) supports the middle, or managerial, level of the organization.
- An MIS uses data collected from a TPS to generate routine reports.
- An MIS organizes and analyzes data to give mid-level managers the tools to make better decisions.
- MIS tools are also classified as business intelligence tools because they assist managers in making informed decisions.
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Examples of Management Information Systems
A spreadsheet application, such as Microsoft Excel, function as an MIS. A manager can use a spreadsheet to generate routine reports (Figure 2.3) and improve decision-making.
Samples of routine reports include
- a monthly report tracking the sales of bananas,
- a monthly report showing the number of times an employee was absent from work, and
- a weekly report showing the average delivery time for customer orders.
Decision Support System (DSS)
- A decision support systems (DSS) supports the middle, or managerial, level of the organization.
- A DSS uses data collected from an MIS, TPS, and external sources to provide business intelligence for nonroutine decision-making.
- Mid-level managers are the typical users of a DSS.
- A nonroutine decision can occur at an unexpected time in which the manager needs to make a decision.
Examples of Nonroutine Decisions That a DSS Can Support
- What is the quickest route for delivering a product?
- How can we get raw materials from a supplier if a natural disaster disrupts the normal routine?
- If the price were significantly reduced, how would that impact the sale of our product?
Executive Support System (ESS)
- An executive support system (ESS) is used at the executive level of the organization.
- An ESS is used by senior managers to improve decision-making.
- An ESS uses both internal and external data to support decision-making.
- Examples of internal data are an MIS and DSS that feed data to the ESS.
- External data sources include competitors, government agencies, and any other special-interest groups that exist within the organization's sphere of influence. For example, an organization that manufactures baby food will collect information from consumer reporting agencies that provide reviews to the public.
- An ESS provides data to senior managers in the form of charts, graphs, and tables.
- Data in an ESS is usually presented via a digital dashboard that shows summary data for the entire organization. A digital dashboard is similar to the concept of a dashboard in a car (Figure 2.6). The driver of the car can quickly get an idea of how well the car is working by looking at the dashboard. The dashboard of a car will show information about fuel, mileage, speed, oil, and many other variables, depending on the type of vehicle. Similarly, the digital dashboard provides the senior manager data about all aspects of the organization to aid decision-making.
- Long-term planning and forecasting are two examples of decisions that a senior-level manager makes. Business intelligence and analytic tools available through the ESS support this process (see example in Figure 2.7).
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Enterprise Applications
- Enterprise applications are cross-functional; they are used by multiple functional areas of the business.
- Enterprise applications can also span the three different levels of the organization: operational, managerial, and executive.
- Four main types of enterprise applications are used by organizations:
- Enterprise resource planning (ERP) systems: These systems integrate fragmented data into a single repository to improve operational efficiency and decision-making.
- Supply chain management (SCM) systems: These systems support acquisition, sourcing, production, and delivery of the company's products.
- Customer relationship management (CRM) systems: These systems support the company's relationship with its customers.
- Knowledge management systems (KMS): These systems collect, store, and disseminate the organization's knowledge and expertise (both internal and external) to improve decision-making.
Each of the four enterprise systems listed above is discussed in more detail in later lessons.
Systems and Technologies Supporting the Business
In addition to the five different types of information systems previously discussed, there are additional systems and technologies that businesses use today. Most of these are web-based and transform how businesses interact with their employees and the public. This section describes three different technologies that businesses use to make them more competitive and relevant in today's global economy.
The systems are intranets, extranets, and e-business, e-commerce, e-government.
Intranets
An intranet is an internal network that only authorized users can access. The company uses its intranet to share information with employees, clients, suppliers and other authorized entities. For example, consider Penn State's Canvas as an intranet. Only internal participants (students, instructors, and developers) have access to this system.
Extranets
An extranet is a restricted part of an organization's internal network that enables business to exchange information with stakeholders securely over the internet. Have you ever had to track a package online? This would be an example of using an extranet (Figure 2.6). The customer is using the internet to access part of the organization's internal intranet.
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E-business, E-commerce, and E-government
Each E stands for the word electronic. In this case, electronic refers to web-based. The web makes many business activities and business processes available:
- Electronic business (e-business) refers to the conduct of business via the Internet. The activities can range from filling out a job application to processing an order request.
- Electronic commerce (e-commerce) refers to any activities that involve the buying and selling of products and services online. E-commerce is a subset of e-business.
- Electronic government (e-government) refers to the online interaction between a government and any relevant party, such as another government, a citizen, an employee, or a business. Specific examples of activities in the e-government category include filing taxes electronically, applying for a government grant online, and renewing your driver's license online.
Systems to Support Collaboration and Social Business
In the previous sections, we summarized the various systems and technologies used to support businesses. In this section, we will introduce systems that support collaboration and social business.
Collaboration
Most work in organizations is performed in teams. As such, collaboration and teamwork are critical in today’s workforce. Collaborations occur when two or more people or organizations work together to achieve a specific goal. Teamwork, however, is a collaborative effort to accomplish team-specific tasks to collectively achieve the team mission. Businesses are using a variety of tools and technologies to support collaboration and teamwork. For example, Penn State encourages the use of Zoom to facilitate remote collaborations and Box to share and edit documents. In another example, teams use G Suite tools to facilitate file storage, file sharing, and collaborative editing.
Social Business
Organizations enhance collaboration by embracing social business. Social business uses web-based collaborative tools, such as internal and external social networking platforms, to engage employees, customers, and suppliers. For example, Red Robin uses Yammer as an enterprise social networking tool to facilitate crowdsourcing of innovative ideas on how to improve operations and reduce costs.
Benefits of Collaboration and Social Business
Many benefits can be derived from using collaboration and social business tools. Teams benefit directly through the enhancement of the quality of collaboration and teamwork. As a result, organizations benefit from enhanced innovation, productivity, quality, and customer service.
Critical Thinking 2.3. What collaboration tool do you use most frequently to facilitate teamwork? Why?