Transcript Introduction to MIS - Pennsylvania State University

INFSY540.1
Information Resources in Management
Lesson #4
Chapter 9
Decisions in Business Areas
Copyright © 1998 by Jerry Post
Introduction to MIS
1
Decisions in
Functional Areas
Strategy
Tactical
Decisions
Operations
Company
2
Decision Making
and
Problem Solving
Herb Simon’s Model of
Decision Making and
Problem Solving
Decision Making
and
Problem Solving
Intelligence
Design
Choice
Implementation
Monitoring
Herb Simon’s Model of
Decision Making and
Problem Solving
Programmed versus Nonprogrammed Decisions

Programmed decisions




Structured situations with well defined relationships
Quantifiable
Management information system
Nonprogrammed decisions



Ill-structured situations with vague or changing relationships
between variables
Not easily quantifiable in advance
Decision support systems
5
Problem Solving Approaches
6
An Overview of Management
Information Systems
Figure 10.3
9
Figure 10.4
10
Characteristics of an MIS





Fixed format, standard reports
Hard-copy or soft-copy reports
Uses internal data
User-developed reports
Users must request formal reports from IS department
11
12
Figure 10.7
13
Manufacturing MIS


Inventory management (MRP, JIT)
Process control




Computer-assisted manufacturing (CAM)
Computer integrated manufacturing
Flexible manufacturing system
Quality control
14
Figure 10.8
15
Figure 10.9
16
Production Models




Process Control
Inventories, MRP
Computer Integrated Manufacturing
Product Design
Computers are used to track inventory
levels, receipts, and shipments.
Sophisticated warehouse information
systems automatically route boxes to
storage and switch conveyor systems to
send packages to trucks waiting at the
loading docks.
17
Suppliers
Integrated Manufacturing
Customers
raw
materials
production
packing
production schedule
Send EDI
notices to
suppliers.
shipping
Q
workers & materials
optimize schedule
schedule changes
time
forecast sales
by product
Information & Control
18
File: C09E05a.xls
Production
Production Queuing Model
Number of Repair Persons
backups
2
loss per
$ per day
machine
mean time to failure
mean repair time
500
avg daily repairer cost
# repairers
15
days
2
days
150
1
machines
cost of
Probability
waiting to
lost
# machines
expected
be fixed
production
wait to fix
$ loss
# repairers
2
Probability
#
machines
wait to fix
# repairers
Probability
expected
# machines
expecte
$ loss
wait to fix
$ loss
0
0
0.1324
0
0.3162
0
0.3422
1
0
0.1413
0
0.3373
0
0.3650
2
0
0.1507
0
0.1799
0
0.1947
19
Production Example

Parameters







Output:


Number of backup machines
Number of repair workers
Mean time to failure
Mean repair time
Cost additional workers
Cost of lost production
Total costs
Objective:

Hire the number of workers that leads to the least cost
20
File: C09GISa.xls
Geographic Models
City
1980 pop 1990 pop 1980 per capita
1990income
per capita
1980income
hard sales
1980 soft sales
1990 hard sales
1990 soft sale
Clewiston
5219
6085
7645
13598
452
562.5
367.6
525.4
Fort Myers
36638
45206
6483
16890
535.2
652.9
928.2
1010.3
Gainesville
81371
84770
6150
13672
365.2
281.7
550.5
459.4
Jacksonville
540920
635230
6767
15316
990.2
849.1
1321.7
1109.3
Miami
346865
258548
6084
16874
721.7
833.4
967.1
1280.6
Ocala
37170
42045
6175
12027
359
321.7
486.2
407.3
Orlando
128291
164693
6735
16958
425.7
509.2
691.5
803.5
Perry
8254
7151
5727
11055
300.1
267.2
452.9
291
Tallahassee
81548
124773
6310
14578
595.4
489.7
843.8
611.7
Tampa
271523
280015
6441
15081
767.4
851
953.4
1009.1
21
R ed
Yell ow
R ed
3.2
2.3
5.0
4.2
2.3
1.9
3.7
3.2
Green
Tallahassee
Blue
R ed
Yell ow
Green
2.1
1.7
1.4
1.1
Green
R ed
Blue
Yell ow
R ed
1990
Soft
Goods
1980
Hard
Goods
1980
Soft
Goods
per capita income
7000+
6700
17,000
15,000
6400
13,000
1.7
1.1
1.1
1.0
Green
Gainesville
11,000
5800-
9,000
1980
1990
Yell ow
1.8
1.5
1.4
1.2
Blue
Ocala
Green
Blue
R ed
Orlando
R ed
3.6
3.8
2.9
3.2
Green
Yell ow
2.6
3.0
1.6
1.9
Yell ow
Green
Tampa
Blue
Blue
R ed
R ed
Yell ow
3.5
3.8
2.0
2.5
Green
6100
Blue
Jacksonville
Perry
1990
Hard
Goods
Yell ow
Fort Myers
Clewiston
Yell ow
1.4
2.0
1.7
2.1
Green
Blue
Miami
Blue
R ed
Yell ow
3.7
4.8
2.7
3.2
Green
Blue
22
Accounting
Because of the volume of data, accountants are primary users of
information systems. Spreadsheets are used to evaluate the
financial condition of the firm and help make decisions.
23
Accounting Models

Transaction Processing & Tactics




Control Systems



Accounting systems are models
Standards for reports
Decisions & Data
Accuracy
Fraud
Strategic Support


Information
Customization
24
File: C09E01a.xls
Salaries
Fringes
Supplies
Fixed Costs
Total
Activity Based Costing
371,917
118,069
76,745 Traditional Cost
23,614 Accounting
590,345
salaries fringes
supplies fixed costs total
Process sales order
91,253
28,969 18,830
5,794 144,846
Source parts
85,882
27,264 17,722
5,453 136,321
72,144
Expedite supplier orders
45,450
14,429
9,379
2,886
49,945
Expedite internal processing
31,466
9,989
6,492
1,998
47,599
Resolve supplier quality
29,988
9,520
6,188
1,903
45,235
Reissue purchase orders
28,498
9,047
5,881
1,809
27,747
Expedite customer orders
17,482
5,548
3,607
1,110
17,769
Schedule intracompany sales
11,195
3,554
2,309
711
16,705
Request engineering change
10,524
3,341
2,172
668
16,648
Resolve problems
10,488
3,330
2,164
666
15,386
Schedule parts
9,691
3,078
2,001
616
371,917 118,069 76,745
23,614 590,345
25
Activity Based Costing
Process Diagram
Identify Subsystems
Process Sales
Orders
Source
Parts
Expedite
Internal
Processing
Reissue
Purchase
Orders
Expedite
Supplier
Orders
Expedite
Customer
Orders
Resolve
Problems
Schedule
Intracompany
Sales
Schedule
Parts
Resolve
Supplier
Quality
Request
Engineering
Change
Assign costs to each subprocess by category (salaries, fixed costs . . .)
26
Financial
Markets
Information is the essence of a financial market. Its purpose is to bring
buyers and sellers together. With thousands of investments and millions of
buyers and sellers, brokers are surrounded by data. The problem lies in
analyzing and evaluating this data.
27
File: C09E02a.xls
Finance
Balance Sheet for 1999
Cash
Receivables
Inventories
Total Current Assets
Net Fixed Assets
Total Assets
33,562
87,341
15,983
136,886
Accounts Payable
Notes Payable
Accruals
Total Current Liabilities
45,673
182,559
Bonds
Common Stock
Ret. Earnings
Liabs. + Equity
32,872
54,327
11,764
98,963
14,982
57,864
10,750
182,559
28
Finance
Income Statement for 1999
Sales
$97,655
Operating Costs
76,530
Earnings before interest & tax 21,125
Interest
Earnings before tax
taxes
Net Income
tax rate 1993
dividends 1993
shares out. 1993
40%
60%
9763
4,053
17,072
6,829
10,243
Dividends
Add. to Retained Earnings
6,146
4,097
Earnings per share
$0.42
29
Corporate Finance
Balance Sheet projected 2000
Income Statement projected 2000
Cash
$36,918
Acts Receivable
96,075
Inventories
17,581
2
Accts Payable
Notes Payabale
Accruals
$36,159
54,327
12,940
Total Cur. Assets 150,576
Total Cur. Liabs. 103,427
Net Fixed Assets
Bonds
Common Stock
Ret. Earnings
14,982
57,864
14,915
Liabs + Equity
191,188
Total Assets
45,673
$196,248
Sales
Operating Costs
2
5
3
$ 107,421
84,183
Earn. before int. & tax
Interest
23,238
4,306
Earn. before tax
taxes
18,931
8,519
Net Income
10,412
Dividends
Add. Funds Need
6,274
5,060
Add. to Ret. Earnings
Bond int. rate
5%
Added interest
1
4
Earnings per share
$ 4,165
$0.43
253
1
Forecast sales and costs.
2
Forecast cash, accts receivable, accts payable, accruals.
3
Add gain in retained earnings.
4
Compute funds needed and interest cost.
5
Add new interest to income statement.
Tax rate
Dividend rate
Shares outstanding
45%
60%
9763
Sales increase
Operations cost increase
10%
10%
Results in a CIRCular calculation.
30
Marketing
Marketing decisions often entail determining customer
preferences. Interviews and data collection are an important first
step. Analyzing conflicting data is a challenge that often requires
sophisticated decision support tools.
31
Marketing Data Sources

Internal







Sales
Warranty cards
Customer service
Coupons
Surveys
Focus groups
Government


Census



Income
Demographics
Regional data
Purchase







Scanner data
Competitve market analysis
Mailing & phone lists
Subscriber lists
Rating services
Shipping records
Government

Legal registration




Drivers license
Marriage
Housing/construction
Business/legal notices
32
File: C09E03a.xls
no promo
promo 1
promo 2
promo 3
Week
1
2
3
4
5
6
1
2
3
4
5
6
1
2
3
4
5
6
1
2
3
4
5
6
Our
sales ($)
36725
37564
35835
38256
38698
37865
38854
38933
39452
38762
38896
37602
38210
39786
42986
43140
43976
43786
47532
43876
42087
40123
38742
35673
Competition
sales ($)
86524
87349
86783
88653
89875
85762
87654
88534
92576
93765
91543
89243
89456
90765
88976
89653
89763
89076
88753
90753
92764
93765
94109
93875
Customer
survey
rating
45
46
42
48
47
43
47
47
46
46
47
46
48
52
54
55
56
54
42
41
38
36
37
36
Marketing


Research and
Forecasting
Customer Service
33
Promotion Analysis
Regression Results
With no promotions:
sales = 20,865 + 342 * consumer + 339 * week
consumer survey average = 45
Promotion 1:
sales = 42,370 - 62 * consumer - 211 * week
consumer survey average = 47
Promotion 2:
sales = 13,448 + 501 * consumer + 545 * week
consumer survey average = 53
Promotion 3:
sales = 44,808 + 98 * consumer - 2067 * week
consumer survey average = 38
34
Promotion Results Graph
Inchiki
Promotion Options
60000
$ sales
50000
40000
30000
20000
10000
0
-10000
1
No promo
3
5
7
promo1
9 11 13 15 17 19 21 23
week
promo2
promo3
35
Figure 10.11
36
Figure 10.12
37
File: C09E04a.xls
Human Resources
Name
Caulkins
Jihong
Louganis
Naber
Spitz
Weissmuller
Department
Corporate
Performance
r1
r2
r3
9
7
6
3
6
7
8
7
7
9
8
8
3
4
3
5
4
6
6
6
6
5
6
5
Merit Pay
Raise pool
Pct
Perf
73%
53%
73%
83%
33%
50%
Current
Salary
35.8
17.9
29.5
19.8
17.5
53.2
21.7
18.9
Salary range ($000)
High
Low
Avg
37.5
28.4
36.4
18.9
15.4
16.3
30.2
26.7
28.9
23.2
19.5
21.4
22.4
17.3
18.4
60.4
32.5
45.2
32.1
22.2
21.9
124
9.2
18.9
$10000
Merit
$100
733
533
733
833
333
500
3665
Market
Adjust.
Total
Raise
733
533
733
833
333
500
3665
Raise%
2.0%
3.0%
2.5%
4.2%
1.9%
0.9%
2.4%
38
Human Resources
dollars
Raises
4000
3500
3000
2500
2000
1500
1000
500
0
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Caulkins
Jihong
Raise
Louganis
Naber
Raise pct
Spitz
Weissmuller
Performance
39
Appendix: Financial Ratios

Goals



Highlight relationships
among financial accounts
Compare firms within
industries
Categories





Profitability
Liquidity
Activity
Leverage (debt)
DuPont Analysis

Margin versus Quantity
40
Profitability Ratios
Net income before taxes
Profit margin=
Net sales
Earnings per share (EPS) =
Net income after taxes + dividends
Number of shares outstandin g
Net income after taxes
Return on equity (ROE) =
Equity (book value)
Average market price per share
Price earnings ratio (P / E) =
EPS
Higher is better. Except a high P/E ratio might indicate that
a stock is overpriced in the market.
41
Liquidity Ratios
Current ratio=
Current assets
Current liabilities
Current assets - Inventories
Quick (or Acid) test =
Current liabilities
Higher is better. Except too high implies excess cash on
hand--which should be invested.
42
Activity Ratios
Asset turnover=
Net sales
Total assets
Low implies excess capacity or poor sales.
Inventory turnover =
Cost of goods sold
Inventory
Low implies poor inventory management or weak sales.
Accounts receivable
Average collection period =
Sales per day
Low implies poor management of collections.
43
Leverage Ratios
Debt ratio=
Total debt
Total assets
Highly variable, depending on management and industry.
Times interest earned =
Income before taxes + Interest charges
Interest charges
Low implies problems with covering debt payments.
44
DuPont Analysis
Profit margin x Total asset turnover
ROA =
Net income
Sales
x
Sales
Total assets
Choice: sell at high profit margin, or high volume.
ROA x Leverage
ROE = Net income
Total assets
x
Total assets Common equity
45