Chapter 2: Different Type of Information System Case Study

Three main categories of information systems serve different organizational levels: operational- level
systems, management-level systems, and strategic-level systems.

i. Operational level System

ii. Management level System
iii. Strategic level System

Operational Level System

Who?

 It support operational managers

 by keeping track of the elementary activities and transactions of the organization,
 such as sales, receipts, cash deposits, payroll, credit decisions, and the flow of materials in a factory.

Purpose?

 The principal purpose of systems at this level is to answer routine questions and to track the flow of transactions
through the organization.
 How many parts are in inventory? What happened to Mr. William's payment? To answer these kinds of questions,
information generally must be easily available, correct, and accurate.

Examples:

 Examples of operational-level systems include

 a system to record bank deposits from automatic teller machines or
 one that tracks the number of hours worked each day by employees on a factory floor.

Management Level System

Basic Definition:

 It mainly refer to the category of information systems that support managerial

decision-making and control within an organization

Who?

 These systems provide managers at different levels with the necessary information and tools to plan, organize, and
control various aspects of business operations.
 They serve the monitoring, controlling, decision-making, and administrative activities of middle managers.
 It provides managers with regular reports and summaries of essential information from various departments and
levels of the organization.
 These systems collect, process, and present data in a structured format, enabling managers to monitor performance,
make informed decisions, and allocate resources effectively.

Principal Questions?

 The principal question addressed by such systems is this: Are things working well?
 These systems often answer "what-if" questions:
 What would be the impact on production schedules if we were to double sales in the month of December?
  What would happen to our return on investment if a factory schedule were delayed for six months?
Management-level systems typically provide periodic reports rather than instant information on
operations.
 Answers to these questions frequently require new data from outside the organization,
as well as data from inside that cannot be easily drawn from existing operational-level systems.

Examples:

An example is an inventory management system used by a retail company.

Extra:

These systems collect, process, and present data in a structured format, enabling managers to monitor performance, make
informed decisions, and allocate resources effectively.

Some management-level systems support non-routine decision-making.

They tend to focus on less-structured decisions for which information requirements are not always clear.

Strategic Level System

Who?
i. It help senior management tackle and address strategic issues and long- term
trends, both in the firm and in the external environment.
ii. It is dedicated towards supporting strategic decision-making at the highest level of an organization.
iii. These systems provide top-level executives, and senior management with the necessary information
and tools to formulate long term strategies, set organization goals, and allocate resources effectively.
iv. It focusses on the broader picture and help shape the direction of the organization.

Principal Questions?

 Their principal concern is matching changes in the external environment with existing organizational
capability.
 What will employment levels be in next five years?
 What are the long-term industries cost trends, and where does our firm fit in? What products should we
be making in next five years?

Examples:

 An example of strategic level system is a Balanced Scorecard (BSC), which is a

framework that translates an organization’s strategy into a set of performance measures across different
perspectives, including financial, customer, internal processes, and learning and growth.
It provides a comprehensive view of the organization’s performance and aligns it with strategic goals.
 Other examples are
scenario analysis tool,
market intelligence systems, and
 Enterprise Resource Planning (ERP) with
 strategic modules that support long term planning and decision making at the top level of an organization

 Information systems also serve the major business functions, such as sales and marketing,
manufacturing and production, finance and accounting, and human resources.
 A typical organization has operational, management, and strategic-level systems for each
functional area.
 For example, the sales function generally has a sales system on the operational level to record
daily sales figures and to process orders.
 A management-level system tracks monthly sales figures by sales territory and
reports on territories where sales exceed or fall below the anticipated levels.
 A system to forecast sales trends over a five-year period serves the strategic level.

There are other various types of systems utilized by organizations to handle information processing,
storage, and distribution. Here is an overview

i. Executive Information Systems (EIS)

ii. Enterprise Resource Planning (ERP) Systems
iii. Knowledge Management Systems (KMS)
iv. Customer Relationship Management (CRM) Systems
v. Geographic Information Systems (GIS)
vi. Expert Systems
vii. Collaboration System

 Executive Information Systems (EIS):

EIS cater to the needs of top-level executives, offering high-level
summaries and key performance indicators (KPIs) for strategic decision-making.

 Enterprise Resource Planning (ERP) Systems:

ERP systems integrate various business functions and processes into a unified system. They typically
include modules for finance, human resources, supply chain management, and customer relationship
management. ERP systems streamline operations and improve coordination between departments.

 Knowledge Management Systems (KMS):

KMS capture, organize, and distribute an organization's knowledge assets. They facilitate knowledge
sharing, collaboration, and learning

 Customer Relationship Management (CRM) Systems:

CRM systems manage an organization's interactions with customers and maintain customer-related data.
They support sales, marketing, and customer service processes, aiming to enhance customer satisfaction
and retention.

 Geographic Information Systems (GIS):

 GIS systems capture, store, analyze, and present geographical data. They are utilized for mapping, spatial
analysis, and decision-making in fields like urban planning, environmental management, and logistics.

 Expert Systems:
Expert systems replicate the decision-making abilities of human experts in specific
domains. They use rule-based logic and knowledge bases to provide problem-solving advice and solutions.

 Collaboration Systems:
Collaboration systems facilitate teamwork, communication, and information
sharing in a digital environment. They often incorporate features like document sharing, real-time
messaging, and project management tools.

Types of Information System to Support the organization

Figure 2-2 shows the specific types of information systems that correspond to each
organizational level.

There are following types of information system to support the organization.

i. At Strategic Level : Executive Support System (ESS)
ii. At Management Level : Management Information System (MIS) &
Decision Support System (DSS)
iii. At Operational Level : Transaction Processing System

Extract of Figure 2.2.

 It should be noted that each of the different systems may have components that are
used by organizational levels and groups other than its main constituencies.
 A secretary may find information on an MIS, or a middle manager may need to extract
data from a TPS
 Transaction Processing Systems:

Introduction:
 A Transaction Processing System (TPS) is an information system that is designed to facilitate and
manage routine business transactions.
 It is responsible for capturing, processing, and storing transactional data that occurs as a part of
an organization's day-to-day operations.
 The primary function of a TPS is to ensure the accurate and efficient processing of transactions.
 It processes a wide range of transactions such as sales, purchases, payments, and inventory
updates.
 For example, when a customer makes a purchase, the TPS records the details of the transaction,
such as the item purchased, the quantity, the price, and the customer's information.

Advantages:

 TPSs provide several benefits to organizations.

 First, they enable efficient and accurate recording of transactions, reducing the chances of errors and
inconsistencies. This helps in maintaining reliable and up-to-date records of business activities.
 Second, TPSs support operational decision-making by providing real-time information on transaction
status and inventory levels. This allows organizations to monitor their operations and make timely
adjustments as needed.
 Furthermore, TPSs serve as the foundation for other information systems within an organization.
Data captured by TPSs serves as input for management information systems, decision support systems,
and other higher-level systems that rely on transactional data for analysis and reporting.
 Overall, a Transaction Processing System plays a vital role in ensuring the smooth and efficient handling
of routine business transactions, maintaining accurate records, and supporting operational decision-
making within an organization.

Inclusions:
Typically, a TPS involves the following activities:
 Capturing data to organize in files or databases;
 Processing of files/databases using application software;
 Generating information in the form of reports; and
 Processing of queries from various quarters of the organization.

Features of TPS

Basic features of TPS are given as follows:

1. Large volume of data
As TPS is transaction oriented and generally consists of large volumes of data, it requires greater
storage capacity. Their primary objective is to ensure that the data regarding the economic events
in the enterprises are captured quickly and correctly.

2. Automation of basic operations

Ant TPS aims at automating the basic operations of a business enterprise and plays a critical role
in the day to day functioning of the enterprise. Any failure in the TPS for a short period of time
can play havoc with the functioning of the enterprise. Thus, TPS is an important source of up to
date information regarding the operations in the enterprise.

3. Benefits are easily measurable

TPS reduces the workload of the people associated with the operations and improves their
efficiency by automating some of the operations. Most of these benefits of the TPS are tangible
and easily measurable. Therefore, cost benefit analysis regarding the desirability of TPS is easy
to conduct. As the benefits from TPS are mainly tangible, the user acceptance is easy to obtain.

4. Source of input for other systems

TPS is the basic source of internal information for other information systems. Heavy reliance by
other information systems on TPS for this purpose make TPS important for tactical and strategic
decisions as well.

Purpose of TPS
1. It processes transactions & produce report.
2. It support monitoring, collection, storage, processing & disseminating of organization's basic
business transaction
3. It perform & record daily routine transaction necessary to conduct business.

Major Component of TPS

The principal components of a TPS include inputs, processing, storage and outputs. The components
or elements are part of both manual and computerized systems.

1. Inputs
 Source documents, such as customer orders, sales, slips, invoices, purchase orders, and
employee time cards, are the physical evidence of inputs in to the Transaction Processing
System.
 They serve several purposes like capturing data, facilitating operations by communicating data
and authorizing another operation in the process, standardizing operations by indicating, which
data require recording and what actions need to be taken and providing a permanent file for
future analysis, if the documents are retained etx
2. Processing

 This involves the use of journals and registers to provide a permanent and chronological record of inputs.
Journals are used to record financial accounting transactions, and registers are used to record other types
of data not directly related to accounting.
 Some of the common journals are sales journal, purchase journal, cash receipts journal etc

3. Storage

 Ledgers and files provide storage of data on both manual and computerized systems.
 The general ledger, the accounts/vouchers payable ledgers, and the accounts receivable ledger
are the records of final account that provide summaries of a firm‘s financial accounting
transactions.

4. Outputs

Any document generated in the system is output. Some documents are both output and input.
For e.g; a customer invoices is an output from the order-entry application system and also and
input document to the customer. The trial balance lists the balances of all the accounts on the
gametal ledger and tests the accuracy of the record keeping. Financial reports summarize the
results of transaction processing and express these results in accordance with the principles of
financial reporting.

Activities in Transaction Processing Cycle

A transaction processing cycle consists of following basic activities:

1. Data entry Activities

The input activity in TPS involves a data entry process. In this process, data is captured or
collected by recording, coding, and editing activities.

2. Transaction processing activities

Transaction processing systems process data in two basic ways:

 Batch Processing :
Transaction data are accumulated over a period of time and processed
periodically.

 Real-time Processing - (also called online processing) :

 Data are processed immediately after a transaction occurs.
All online transaction processing systems incorporate real-time processing capabilities. Many online
systems also depend on the capabilities of fault tolerant systems that can continue to operate even if
parts of the system fail.

3. Database maintenance activities

An organization's data must be maintained by its transaction processing systems so that they
are always correct and up-to-date.
Therefore, transaction processing systems update the corporate database of any organization to reflect
changes resulting from day-to-day business
transactions.

4. Document and Report Generation

Transaction processing systems produce a variety of documents and reports.
Examples of transaction documents include purchase orders, paychecks, sales receipts, invoices, and
customer statements.
Transaction reports might take the form of a transaction listing such as a payroll register, or edit reports
that describe errors detected during processing.

5. Inquiry Processing activities

Many transaction processing systems allow you to use the Internet, intranets, extranets, and
web browsers or database management query languages to make inquiries and receive
responses concerning the results of transaction processing activity. Typically, responses are
displayed in a variety of pre-specified formats or screens.
Examples of queries include:

Checking on the status of a sales order

Checking on the balance in an account
Checking on the amount of stock in inventory

Online transaction processing systems play a strategic role in electronic commerce.

 Many firms are using the Internet, extranets, and other networks that tie them
electronically to their customers or suppliers for online transaction processing
(OLTP).
 These real-time systems, which capture and process transactions immediately, can
help them provide superior service to customers and other trading partners.
 OLTP systems add value to a company‟s products and services, and thus give them an important
way to differentiate themselves from their competitors
 Knowledge Work and Office System

Introduction:

 Knowledge work and personal system within an organization means support of information
system designed to enhance productivity, information sharing process and ensure effective
communication among team members involved in knowledge-intensive tasks.
 Making personal knowledge available to others is the central activity of the knowledge-creating
company.
 It takes place continuously and at all levels of the organization.

Current Situation:

 Knowledge management has thus become one of the major strategic uses of information technology.
 Many companies are building knowledge management systems (KMS) to manage organizational
learning and business know-how.
 The goal of such systems is to help knowledge workers create, organize, and make available important
business knowledge, wherever and whenever it's needed in an organization.
 This information includes processes, procedures, patents, reference works, formulas, "best practices,"
forecasts, and fixes. Internet and intranet Web sites, group-ware, data mining, knowledge bases, and
online discussion groups are some of the key technologies that may be used by a KMS.

Advantages for the Organization:

 Knowledge management systems also facilitate organizational learning and knowledge creation.
 They are designed to provide rapid feedback to knowledge workers, encourage behavior changes by
employees, and significantly improve business performance.
 As the organizational learning process continues and its knowledge base expands, the knowledge-creating
company works to integrate its knowledge into its business processes, products, and services.
 This integration helps the company become a more innovative and agile provider of high-quality products
and customer services, as well as a formidable competitor in the marketplace.

Purpose of KMS

1. To manage organizational learning & business knowhow.

2. To help knowledge workers create, organize and make available important business

knowledge, wherever and whenever it's needed in an organization.

3. It facilitate organizational learning & knowledge creation.

Types of Knowledge:

There are two broad types of knowledge - Explicit and Tacit.

KMS makes a direct connection between an organization‘s intellectual assets — both Explicit [recorded] and Tacit
[personal know-how] — and positive results.

i. Explicit knowledge:

Explicit knowledge is the knowledge that can be formalized easily and as a consequence is easily
available across the organization. Explicit knowledge is expressed, and represented as spoken
words, written material and compiled data. This type of knowledge is codified, easy to
document, transfer and reproduce. For example – Online tutorials, Policy and procedural
manuals.

ii. Tacit knowledge:

Tacit knowledge, on the other hand, resides in a few, often in just one person, and hasn‘t been
captured by the organization or made available to others. Tacit knowledge is unarticulated and
represented as intuition, perspective, beliefs, and values that individuals form based on their
experiences. It is personal, experimental and context-specific. It is difficult to document and
communicate. For example – hand-on skills, special know-how, employee experiences. It is this
tacit knowledge that differentiates between organizations when push comes to shove, and hence
provides the strategic edge to any organization. A regular example in the software industry is
how to write code to get around a particular limitation, or to include a particularly tricky condition.

Tools of Knowledge Work & Office System

- Blog

- Collaboration of Virtual Work Spaces

- Social Network Services

- Building Knowledge Clusters

- Advance Search Tool

- Voice Over Internet Protocol

- Knowledge Portals
 Management Information System
Introduction

 A Management Information System (MIS) is a type of information system that supports decision-
making and management activities within an organization.
 It collects, processes, stores, and disseminates data and information to assist managers in
planning, organizing, and controlling operations.
 The primary objective of an MIS is to provide accurate, timely, and relevant information to
support managerial decision-making at different levels of an organization.
 It utilizes technology and data management techniques to transform raw data into meaningful
and actionable information that can be used by managers to make informed decisions.
 Management information systems (MIS) serve the management level of the organization,
providing managers with reports and often 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.

Characteristics

i. Management Oriented:

It means that efforts for the development of the information system should start from an appraisal
of management needs and overall business objectives. Such a system is not necessarily for top
management only but may also meet the information requirements of middle level or operating
levels of management as well.

ii. Management Directed:

Because of management orientation of MIS, it is necessary that management should actively

direct the system’s development efforts. For system’s effectiveness, it is necessary for management to devote their
sufficient time not only at the stage of designing the system but for its review as well to ensure that the
implemented system meets the specifications of the designed system.

iii. Integrated

The best approach for developing information systems is the integrated approach as all the
functional and operational information sub -systems are tied together into one entity.

An integrated Information system has the capability of generating more meaningful information to
management as it takes a comprehensive view or a complete look at the interlocking sub-systems
that operate within a company.
 iv. Common Data Flows
It means the use of common input, processing and output procedures and media whenever
required.
Data is captured by the system analysts only once and as close to its original source as
possible.
Afterwards, they try to utilize a minimum of data processing procedures and sub-
systems to process the data and strive to minimize the number of output documents and reports
produced by the system.
This eliminates duplication in data collections, simplifies operations
and produces an efficient information system.

v. Heavy Planning Element

An MIS usually takes one to three years and sometimes even longer period to get established
firmly within a company.
Therefore, a MIS designer must be present in MIS development and should consider future enterprise objectives
and requirements of information as per the organization structure of the enterprise as per requirements.

vi. Sub System Concept

Even though the information system is viewed as a single entity, it must be broken down into
digestible sub-systems, which can be implemented one at a time by developing a phased plan.
The breaking down of MIS into meaningful sub-systems sets the stage for this phasing plan.

vii. Common Database

Database is the mortar that holds the functional systems together. It is defined as a "super-file",
which consolidates and integrates data records formerly stored in many separate data files. The
organization of a database allows it to be accessed by several information sub-systems and thus,
eliminates the necessity of duplication in data storage, updating, deletion and protection.

viii. Computerized

Though MIS can be implemented without using a computer; the use of computers increases the
effectiveness of the system. In fact, its use equips the system to handle a wide variety of
applications by providing their information requirements quickly. Other necessary attributes of
the computer to MIS are accuracy and consistency in processing data and reduction in clerical
staff. These attributes make computer a prime requirement in management information system.

Misconception about MIS

Following are the misconception about MIS

i) Any computer based information system is a MIS.
ii) Any reporting system is MIS.
iii) MIS is a management technique.
iv) MIS is a bunch of technologies.
 v) MIS is an implementation of organizational systems and procedures. It is a file structure.
vi) The study of MIS is about use of computers.
vii) More data in generated reports refers more information to managers.
viii) Accuracy plays vital role in reporting

Pre-requisites of an Effective MIS

i. Database:
It is collection of files, which is collection of records and records are nothing but
collection of data. The data in database is organized in such a way that accessing to the data
is improved and redundancy is reduced. The main characteristics of database are given as
follows:

- It is user-oriented.
- It is capable of being used as a common data source to various users, helps in
avoiding duplication of efforts in storage and retrieval of data and information.
- It is available to authorized persons only.
- It is controlled by a separate authority established for the purpose, known as Database
Management System (DBMS).

ii. Qualified System and Management Staff:

The second pre-requisite of effective MIS is that it should be manned by qualified officers. These
officers, who are experts in the field, should understand clearly the views of their fellow officers. For
this, the organizational management base should comprise of two categories of officers; Systems and
Computer experts and management experts.

- Systems and Computer experts in addition to their expertise in their subject area/s
should also be capable of understanding management concepts to facilitate the
understanding of problems faced by the concern. They should also be clear about
the process of decision making and information requirements for planning and control
functions.

- Management experts should also understand quite clearly the concepts and
operations of a computer. This basic knowledge of computers will be useful to place
them in a comfortable position, while working with systems technicians in designing or
otherwise of the information system
 iii. Support of Top Management:

The support from top management is required for the effectiveness of MIS in an
organization. The reasons for the same are as follows:

- Any implementation, which does not receive the support of top management
will not be effectively controlled and tends to be get lesser priority and may be delayed
or abandoned.

- The resources involved in computer-based information systems are large and are
growing larger in view of importance gained by management information system.

- To gain the support of top management, the officers should place before top
management all the supporting facts and state clearly the benefits, which will
accrue from it to the concern. This step will certainly enlighten management, and will
change their attitude towards MIS. Their wholehearted support and cooperation
will help in making MIS an effective one.

iv. Control and maintenance of MI

Control of the MIS means the operation of the system as it was designed to operate.
Sometime, users develop their own procedures or short cut methods to use the system,
which reduce its effectiveness.
To check such habits of users, the management at each level in the organization should devise checks for the
information system control. Maintenance is closely related to control. Formal methods for changing and
documenting changes must be provided.

v. Evaluation of MIS

An effective MIS should be capable of meeting the information requirements of its executives
in future as well. This capability can be maintained by evaluating the MIS and taking
appropriate timely action.
The evaluation of MIS should take into account the following major
points:

- Examining whether enough flexibility exists in the system to cope with any
expected or unexpected information requirement in future.

- Ascertaining the views of users and the designers about the capabilities and
deficiencies of the system.

- Guiding the appropriate authority about the steps to be taken to maintain

effectiveness of MIS.
Constraints in operating a MIS

Major constraints, which come in the way of operating an information system, are given as follows:

- Non-availability of experts, who can diagnose the objectives of the organization

and provide a desired direction for installing operating system. This problem may be
overcome by grooming internal staff, which should be preceded by proper selection and
training.

- Experts usually face the problem of selecting the sub-system of MIS to be installed
and operated upon. The criteria, which should guide the experts, depend upon the need
and importance of a function for which MIS can be installed first.

- Due to varied objectives of business concerns, the approach adopted by experts for
designing and implementing MIS is a non-standardized one.

- Non-availability of cooperation from staff is a crucial problem, which should be handled

tactfully. This task should be carried out by organizing lecturers, showing films and
also explaining to them the utility of the system. Besides this, some persons should
also be involved in the development and implementation of the system.

Limitations of MIS

Major Limitations of MIS are given as follows:

o The quality of the outputs of MIS is basically governed by the quality of input and processes.

o MIS is not a substitute for effective management, which means that it cannot replace managerial
judgment in making decisions in different functional areas. It is merely an important tool in the hands of
executives for decision making and problem solving

o MIS may not have requisite flexibility to quickly update itself with the changing needs of time, especially
in fast changing and complex environment.

o MIS cannot provide tailor-made information packages suitable for the purpose of every type of decision
made by executives.

o MIS takes into account mainly quantitative factors, thus it ignores the non-quantitative factors like morale
and attitude of members of organization, which have an important bearing on the decision making
process of executives or senior management.

o MIS is less useful for making non-programmed decisions. Such types of decisions are not of the routine
type and thus require information, which may not be available from existing MIS to executives.
 o The effectiveness of MIS is reduced in enterprises, where the culture of hoarding information and not
sharing with other holds.

o MIS effectiveness decreases due to frequent changes in top management, organizational structure and
operational team.

Advantages of MIS/Steps/Process:

Data Collection:
MIS gathers data from various sources within and outside the organization. This data
can be both internal (e.g., sales figures, inventory levels) and external (e.g., market trends, industry
reports). Data is collected through manual entry, automated systems, and integration with other
information systems.

Data Processing:
Once the data is collected, it undergoes processing to convert it into useful information.
Data processing involves activities such as data validation, aggregation, calculation, transformation, and
formatting. This step ensures that the information generated is accurate, consistent, and meaningful.

Data Storage and Management:

MIS includes databases and data repositories to store and manage the
collected data. These databases are designed to facilitate efficient data retrieval, updating, and storage.
Data management practices such as data security, backup, and data governance ensure the integrity and
availability of the stored information.

Information Presentation:
MIS presents information in a format that is understandable and useful for
managers. This can include reports, dashboards, charts, graphs, and visualizations. The information is
tailored to meet the specific needs and preferences of different users and can be accessed through user-
friendly interfaces.

Decision Support:
MIS provides decision support capabilities to managers by offering tools for data
analysis, modeling, and forecasting. These features enable managers to explore different scenarios,
identify trends, analyze performance, and evaluate potential outcomes before making decisions.

Integration and Connectivity: MIS integrates with other information systems within an organization,
such as transaction processing systems, supply chain systems, or customer relationship management
systems. This integration ensures a seamless flow of data and information across different departments
and functions.

Security and Control:

MIS incorporates security measures to protect sensitive data and ensure data
privacy. Access controls, encryption, authentication, and audit trails are implemented to safeguard the
information from unauthorized access and potential threats.
The benefits of a Management Information System include improved decision-making, enhanced
operational efficiency, better resource allocation, increased productivity, and improved communication
and collaboration within the organization.
Management Information System plays a crucial role in providing managers with the necessary information and
insights to make informed decisions and effectively manage the operations of an organization.

Decision Support System

Introduction:
 Decision-support systems (DSS) is a computer based information system that supports individuals,
organizations, or groups, in making decisions and solving problems.

 It makes use of data, models, analytics techniques to provide relevant information and insights for
decision making.

 DSS also serve the management level of the organization and to variety of industries like business,
healthcare, finance and logistics.

 DSS 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.

 Although DSS use internal information from TPS and MIS, they often bring in information from external
sources, such as current stock prices or product prices of competitors.

 Clearly, by design, DSS have more analytical power than other systems.

 They use 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 designed so that users can work with them directly; these systems explicitly include user-friendly
software.

 DSS are interactive; the user can change assumptions, ask new questions, and include new data.

 A DSS is not intended to make decisions for managers, but rather to provide managers with a set of
capabilities that enable them to generate the information required by them in making decisions.

 A DSS supports the human decision-making process, rather than a means to replace it.
Types of Planning Language used in DSS

Two types of planning languages that are commonly used in DSS are:

i. General-purpose planning languages

It allows users to perform many routine tasks, for example; retrieving various data from a
database or performing statistical analyses. The languages in most electronic spreadsheets are
good examples of general-purpose planning languages. These languages enable user to
tackle abroad range of budgeting, forecasting, and other worksheet-oriented problems.

ii. Special-purpose planning languages

It is more limited in what they can do, but they usually do certain jobs better than the
general-purpose planning languages. Some statistical languages, such as SAS and SPSS,
are examples of special purpose planning languages.

Characteristics of DSS
The key characteristics of DSS are given as follows:

- This supports decision making and occurs at all levels of management.

- Instead of helping individuals working on independent tasks, it should be able to help group
making decisions.

- It should be flexible and adaptable, i.e. it should be able to fit itself in the style of a particular
manager and ready to change according to changes in the environment.

- DSS focuses on decision rather than data and information.

- It should be easy to use. A user should not have knowledge of computer programming to
generate reports that helps in decision making.

- DSS can be used for structured problems.

- DSS should be user-friendly.

- DSS should be extensible and evolve overtime.

- DSSs are used mainly for decision making rather than communicating decisions
and training purposes.

- The impact of DSS should be on decision where the manager’s judgment is essential and there is sufficient
structure for computers.
 DSS are characterized by following three properties:

i. Semi-structured / Unstructured decisions:

Structured decisions are those that are easily made from a given set of inputs. Unstructured
decisions and semi-structured decisions are decisions for which information obtained from a
computer system is only a portion of the total knowledge needed to make the decision.

The DSS is particularly well adapted to help with semi-structured / unstructured decisions. In DSS, the
problem is first defined and formulated. It is then modeled with DSS software.

The model is run on the computer to provide results. The modeler, in reviewing these results, might
decide to completely reformulate the problem, refine the model, or use the model to obtain other results.

ii. Ability to adapt to changing need:

Semi-structured / unstructured decisions often do not conform to a predefined set of decisions-

making rules. Because of this, their decision support system must provide for enough flexibility
to enable users to model their own information needs.

The DSS designer understands that managers usually do not know in advance what information they need
and, even if they do, those information needs keep changing constantly.

Thus, rather than locking the system into rigid information producing requirements, capabilities and tools
are provided by DSS to enable users to meet their own output needs.

iii. Ease of Learning and Use:

Since decision support systems are often built and operated by users rather than by computer
professionals, the tools that company possesses should be relatively easy to learn and use.
Such software tools employ user-oriented interfaces such as grid, graphics, non-procedural 4GL and
easily read documentation.
These interfaces make it easier for user to conceptualize and perform the decision making process.

DSS normally works with following models:

- Analytical models
- Specialized databases
- A decision maker's own insights and judgments
- An interactive, computer-based modeling process
 1. Goals and Application of DSS

- They Support semi structured or unstructured decision-making.

- They are flexible enough to respond to the changing needs of decision makers, and
- They are easy to use.

2. Components of DSS

A Decision Support System comprise of the following basic components, which are discussed
below:

i. The user

The user of a DSS is usually a manager with an unstructured or semi-structured

problem to solve.
Manager and staff specialist (analyst) are the two broad classes of
users.
Typically, users do not need a computer background to use a decision support
system for problem solving.
The most important knowledge is a thorough understanding
of the problem and the factors to be considered in finding a solution.

The key points relating to these users are given as follows:

- Manager :
These are the users, who have basic computer knowledge and want the DSS
to be very user friendly. The manager may be at any level of authority in the organization
(e.g., either top management or operating management).

- Staff Specialist (Analysts) :

These are the people, who are more details oriented and willing to use complex system in their day-to-
day work.

ii. Databases

A DSS includes one or more databases that contain both routine and non-routine data from
both internal and external sources. The data from external sources include data about
the operating environment of an organization.

For example; data about economic conditions, market demand for the organization’s goods or
services, and industry competition. DSS users may construct additional databases themselves.
Some of the data may come from internal sources. An organization often generates this type of
data in the normal course of operations.
 For example; data from the financial and managerial accounting systems such as account,
transaction, and planning data. The database may also capture data from other subsystems such
as marketing, production, and personnel.

External data include assumptions about such variables as interest rates, vacancy rates,
market prices, and levels of competition.

Implementation of Database: Database is implemented at three levels as listed below:

- Physical level :
It involves the implementation of the database on the hard disk
i.e. storage of data in the hard disk. The management of storage and access is
controlled by operating system.

- Logical Level :
It is designed by professional programs, which have complete knowledge of DBMS. It deals with the
nature of data stored, the scheme of the data. Storage which is logically divided into various tables
having rows and columns and the techniques for defining relationships with indexes.

- External level :
The logical level defines schema, which is divided into smaller units known as sub-schemas and given to
the managers each sub-schema containing all relevant data needed by one manager.

iii. Model base:

The planning language in a DSS allows the user to maintain a dialogue with the model
base, which is the “brain” of DSS because it performs data manipulations and
computations with the data provided to it by the user and the database.

There are many types of model bases, but most of them are custom-developed models that do
some types of mathematical functions, for example; cross tabulation, regression analysis, time series
analysis, linear programming and financial computations.

The analysis provided by the routines in the model base is the key to supporting
the user’s decision.

DSS with relevant example of its use in marketing & sales: (Dec 2016, 2014 & 2012)

DSS is that type of system which supports managers while solving the semi structured problems by
providing the options from different prospects. DSS gives the analysis based upon the
mathematical/statistical model.

Here is an example of use of DSS in sales and marketing. The total units of sales are assumed to be the
function of following parameters (not only this):
  Incentives to the sales persons
 Promotion
 Rivalry
 Quality of product
 Customer economic status

These parameters do not have equal weightage while determining the sales. Thus the total units
sales will be the sum of products of the weightage and the variables. The sum of the product of
weightage factors and variable will be the mathematical model for the DSS. This model can be
linear of non-linear equation. Hence the sales forecasting analysis can be done by changing the
parameters involved. It also helps in reverse tracking. That is in order to get particulars amounts
of product sold, how much incentives is to be given to sales persons, how much amount to be
invested in promotion, what should be the quality of the product etc.
Now decision maker can make the analysis with the help of DSS by changing the cost of
promotion on sales. Similarly the effect of sales can be analyzed with the change in the
incentives to the sales persons. At the same time, the effect of more than one parameters also
can be checked.

Now decision maker can make the analysis with the help of DSS by changing the cost of
promotion on sales. Similarly the effect of sales can be analyzed with the change in the
incentives to the sales persons. At the same time, the effect of more than one parameters also
can be checked.

Examples of Decision Support Systems in Accounting

Many DSS are developed in-house using either a general type of decision support program
or a spreadsheet program to solve specific problems. Below are several illustrations of these
systems:

i. Cost Accounting System:

The health care industry is well known for its cost complexity. Managing costs in this
industry require controlling costs of supplies, expensive machinery, technology, and
a variety of personnel. Cost accounting applications help health care enterprises calculate
product costs for individual procedures or services. One health care organization, for
example, combines a variety of DSS applications in productivity, cost accounting, case
mix, and nursing staff scheduling to improve its management decision making.

ii. Capital Budgeting System

Companies require new tools to evaluate high-technology investment decisions.

Decision makers need to supplement analytical techniques, such as net present value and internal rate of return, with
decision support tools that consider some benefits of new technology not captured in strict financial analysis. One
DSS designed to support decisions about investments in automated manufacturing technology is Auto Man, which
allows decision makers to consider financial, non financial, quantitative, and qualitative factors in their decision-making
processes. Using this decision support system, accountants, managers, and engineers identify and prioritize these factors. Then
they can evaluate up to seven investment alternatives at once.

iii. Budget Variance Analysis System

Financial institutions rely heavily on their budgeting systems for controlling costs and evaluating managerial
performance.
One institution uses a computerized DSS to generate monthly variance reports for division comptrollers. The
system allows these comptrollers to graph, view, analyze, and annotate budget variances, as well as create
additional one-and five-year budget projections using the forecasting tools provided in the system.

The decision support system thus helps the comptrollers create and control budgets for the cost-center managers
reporting to them.

iv) General Decision Support System

As mentioned earlier, some planning languages used in Decision Support Systems are general purpose and
therefore have the ability to analyze many different types of problems. In a sense, these types of decision support
systems are a decision-maker’s tools. The user needs to input data and answer questions about a specific problem
domain to make use of this type of decision support system. An example is a program called Expert Choice which
supports a variety of problems requiring decisions. The user works interactively with the computer to develop a
hierarchical model of the decision problem. The DSS then asks the user to compare decision variables with each
other.

For instance, the system might ask the user how important cash inflows are versus initial
investment amount to a capital budgeting decision. The decision maker also makes
judgments about which investment is best with respect to these cash flows and which
requires the smallest initial investment. Expert choice analyzes these judgments and
presents the decision maker with the best alternative.

Executive Support Systems or Executive Information Systems

Introduction:

 Executive Support Systems (ESS) or Executive Information Systems (EIS) are specialized information
systems designed to support the strategic decision-making needs of top-level executives within an
organization.
 These systems provide high-level summaries, reports, and analyses of data to aid executives
in monitoring organizational performance, identifying trends, and making strategic decisions.

 It creates generalized computing and communications environment rather than providing any present
applications or specific competence.
Characteristics:

- EIS is a computer based information system that serves the information need of top
executives.

- EIS enables users to extract summary data and model complex, problems without the need to
learn query languages statistical formulas or high computing skills

- EIS provides rapid access to timely information and direct access to management reports

- EIS is capable of accessing both internal and external data

- EIS provides extensive online analysis tools like trend analysis, market conditions, etc

- EIS can easily be given as a DSS support for decision making.

Five Characteristics of the types of information used in executive decision making

i. Lack of Structure

Many of the decisions made by executives are relatively unstructured. These types of decisions are not as clear-cut
as deciding how to debug a computer program or how to deal with an overdue account balance. Also, it is not
always obvious, ‘which data are required ’ or ‘how to weigh available data when reaching a decision.’

ii. High degree of uncertainty

Executives work in a decision space that is often characterized by a lack of precedent.

For example, when the Arab oil embargo hit in mid 1970s, no such previous event could be
referenced for advice.
Executives also work in a decision space where results are not scientifically predictable from actions. If
prices are lowered, for instance, product demand will not automatically increase.

iii. Future orientation

Strategic-planning decisions are made in order to shape future events. As conditions change,
enterprises must change also. It is the executive’s responsibility to make sure that the
organization keeps pointed toward the future.

Some key questions about the future include:

“How will future technologies affect what the company is currently doing?
What will the competition (or the government) do next?
What products will consumers demand five years from now?”
As one can see, the answers to all of these questions about the future external environment are vital.
 iv. Informal Source

Executives, more than other types of managers, rely heavily on informal source for key
information.
For example, lunch with a colleague in another firm might reveal some important competitor strategies.
Informal sources such as television might also feature news of momentous concern to the executive
news that he or she would probably never encounter in the company’s database or in scheduled
computer reports.

v. Low level of details

Most important executive decisions are made by observing broad trends. This requires the
executive to be more aware of the large overview than the tiny items. Even so, many executives insist
that the answers to some questions can only be found by mucking through details.

Principles for designing measures and indicators which are to be included in an EIS

- EIS measures must be easy to understand and collect. Wherever possible, data should
be collected naturally as part of the process of work. An EIS should not add substantially
to the workload of managers or staff.

- EIS measures must be based on a balanced view of the organization's objective. Data
in the system should reflect the objectives of the organization in the areas of productivity,
resource management, quality and customer service.

- Performance indicators in an EIS must reflect everyone's contribution in a fair and consistent
manner. Indicators should be as independent as possible from variables outside the control of
managers.

- EIS measures must encourage management and staff to share ownership of the
organization's objectives. Performance indicators must promote both team-work and
riendly competition. Measures will be meaningful for all staff; people must feel that
they, as individuals, can contribute to improving the performance of the organization.

- EIS information must be available to everyone in the organization. The objective is

to provide everyone with useful information about the organization's performance.
Information that must remain confidential should not be part of the EIS or the management
system of the organization.

- EIS measures must evolve to meet the changing needs of the organization
Advantages/Uses of Executive Support System/Executive Information Systems

i. Strategic Decision Support:

ESS/EIS focus on providing executives with information and insights to support strategic decision-
making. They provide a consolidated view of critical data from various sources, including internal
systems, external databases, and market intelligence.

This information helps executives evaluate the current state of the organization, identify emerging
opportunities or challenges, and make informed decisions to drive the organization's strategy.

ii. Customized Dashboards and Reports:

ESS/EIS present information in customized dashboards and reports tailored to the specific needs of
executives. These dashboards offer a graphical representation of key performance indicators (KPIs),
financial metrics, market trends, and other relevant data.

Executives can monitor the overall health of the organization, track progress towards strategic goals,
and assess the performance of different business units or departments.

iii. Real-Time Data and Analytics:

ESS/EIS provide access to real-time or near-real-time data, allowing executives to stay updated with the
latest information. Real-time data feeds enable executives to respond quickly to changing market
conditions, customer demands, or internal issues.

The systems often incorporate advanced analytics capabilities, such as data visualization, predictive
modeling, and scenario analysis, to support executives in analyzing trends, predicting outcomes, and
evaluating strategic options.

iv. Drill-Down and Drill-Up Capabilities:

ESS/EIS offer drill-down and drill-up capabilities, allowing executives to dive deeper into specific areas of
interest or zoom out for a broader perspective.

Executives can explore underlying details, access supporting documentation, and analyze data at
different levels of granularity. This flexibility enables executives to investigate specific performance
metrics, identify root causes, and gain a comprehensive understanding of the factors influencing
organizational performance.
 v. Integration with External Data Sources:

ESS/EIS often integrate external data sources, such as market research reports, industry benchmarks,
and economic indicators.

This integration provides executives with a broader context for decision-making by incorporating
external market insights and industry trends. The systems may also include competitive intelligence to
help executives evaluate the organization's position in the market and make strategic adjustments
accordingly.

vi. Collaboration and Communication:

ESS/EIS support collaboration and communication among executives and key stakeholders. They provide
features for sharing reports, annotations, and comments, facilitating discussions and collaboration on
strategic initiatives.

This enables executives to align their decisions, share insights, and engage in informed discussions to
drive consensus and strategic alignment within the organization.

vii. Security and Access Control:

ESS/EIS incorporate robust security measures to protect sensitive data and ensure appropriate access
controls. Executives often deal with confidential or sensitive information, and these systems employ
encryption, authentication, and access controls to safeguard data integrity and privacy.

Extra Points:

 Further, Senior managers use executive support systems (ESS) to help them make decisions.
ESS serves the strategic level of the organization. They address non-routine decisions requiring
judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a
solution.

 ESS is designed to incorporate data about external events, such as new tax laws or competitors,
but they also draw-summarized information from internal MIS and DSS. They filter, compress,
and track critical data, displaying the data of greatest importance to senior managers. For
example, the CEO of Leiner Health Products, the largest manufacturer of private-label vitamins
and supplements in the United States, has an ESS that provides on his desktop a minute-to-
minute view of the firm's financial performance as measured by working capital, accounts
receivable, accounts payable, cash flow, and inventory.

 ESS employs the most advanced graphics software and can present graphs and data from many
sources. Often the information is delivered to senior executives through a portal, which uses a
Web interface to present integrated personalized business content from a variety of sources.
  Unlike the other types of information systems, ESS is not designed primarily to solve specific
problems. Instead, ESS provides a generalized computing and communications capacity that
can be applied to a changing array of problems. Although many DSS are designed to be highly
analytical, ESS tends to make less use of analytical models.

 Executive Support Systems or Executive Information Systems empower top-level executives

with the information and tools necessary for effective strategic decision-making. By providing
timely and relevant insights, these systems help executives steer the organization toward its
strategic objectives, respond to market dynamics, and gain a competitive edge.

Expert Support System

Introduction

 An expert system is a computer system that emulates the decision-making ability of a human
expert.

 It imitate the reasoning processes of human expert and provide decision makers with the type
of advice they would normally receive from such expert system .

 An expert system captures human expertise in a limited domain of knowledge as a set of rules in
a software that can be used by others in the organization.

 These systems typically perform a limited number of tasks that can be performed by
professionals in a few minutes or hours, such as diagnosing a malfunctioning machine or
determining whether to grant credit for a loan.

 They are useful in decision-making situations where expertise is expensive or in short supply.

 Expert systems provide answers to questions in a very specific problem area by making human-
like inferences about knowledge contained in a specialized knowledge base. Now, expert
systems are commonly known as AI or Artificial Intelligence.

Benefits of an expert System:

i. Expert advice is available all the time with the use of an expert system.

ii. Knowledge of expert staff can be captured to some extent before they retire/resign from
the organization.
 iii. It can be used as a training aid to increase the expertise of staff.

iv. It always makes rational decisions without any emotional overhead.

v. An expert system does not get tired or overworked like a human expert.

vi. A much faster and efficient way of getting expert help.

Limitations of an Expert System

i. It usually only covers a narrow range of knowledge.

ii. A lot of effort and cost has to go into making a good expert system.

iii. Most expert systems are menu driven which does not deal very well with ambiguous
problems.

iv. An expert system does not learn from mistakes unless user feedback and human
maintenance is part of its ongoing development.

v. An expert system is unlikely to come up with creative solutions to a problem.

vi. Because of its inherent limitations an expert system can never be as good as having human
experts at hand.

vii. It cannot perform or think with an analytical approach due to which it cannot completely
replace a human expert.

Essential quality for Expert System development

The following properties should be possessed by potential applications for qualifying expert
system development.

i) Availability
One or more experts are capable of communicating ‘how they go about solving the
problems to which the Expert System will be applied.

ii) Complexity
Solution of the problems for which the Expert Systems will be used is a complex task
that requires logical inference processing, which would not be easily handled by
conventional information processing.
iii) Domain
The domain, or subject area, of the problem is relatively small and limited to a relatively
well-defined problem area.

iv) Expertise
Solutions to the problem require the efforts of experts. That is, only a few possess the
knowledge, techniques, and intuition needed.

v) Structure
The solution process must be able to cope with ill-structured, uncertain, missing,
and conflicting data, and a dynamic problem-solving situation.

Interrelated Component of an expert System

1. Knowledge Base

Knowledge base stores the rules data and relationships that are used to solve problems and
contains specific facts about the expert area. For instance, the example where an insurance agent
needs both expert tax and financial advice is a good candidate for an Expert System with two
knowledge bases.

2. Inference Engine (Infer means To draw a conclusion)

 The inference engine is the main processing element consisting of system of programs that
requests data from the user, manipulates the knowledge base and provides a decision to the
user.

 It performs this task in order to deduce new facts, which are then used to draw further
conclusions.

 There are, in fact, various techniques which model different reasoning methods; these include
backward and forward chaining; some operate with both.

- A forward-chaining mechanism first examines the KB and the problem at hand; then, it
attempts to discover a solution. For instance, a medical Expert System may be used to examine
a patient‘s symptoms and provide a diagnosis based on the symptomology, the Expert System
might locate several diseases that the patient may here.
- With backward chaining, on the other hand, the Inference Engine starts with a hypothesis or
goal, which it then checks against the facts and rules in the knowledge base for consistency.
So, for instance, the Expert System might be given the goal to ―"find this patient‘s disease(s)
and would work back from there, asking questions as necessary to confirm or a refute
candidate diagnoses".

3. Knowledge Acquisition Subsystem (KAS)

Knowledge Acquisition Subsystem is the software component of an Expert System that enables to
build and refine an expert systems knowledge base.

4. User Interface

A user interface is the method by which an expert system interacts with a user. These can be through
dialog boxes, command prompts, forms, or other input methods.

Activities under Expert System

- Decision Management
- Diagnostic/troubleshooting
- Maintenance Scheduling
- Design/configuration
- Selection/classification
- Process monitoring/control

Need for Expert System

Major reasons for the need of expert systems is given as follow:

i. Expert labor is expensive and scarce. Knowledge workers employee, who routinely work
with data and information to carry out their day -to-day duties are not easy to find and
keep and companies are often faced with a shortage of talent in key positions.

ii. Moreover, no matter how bright or knowledgeable certain people are, they often can
handle only a few factors at a time.
 iii. Both these limitations imposed by human information processing capability and the rushed
pace at which business is conducted today put a practical limit on the quality of human
decision making; thus putting a need for expert systems.

Application of Expert System

Accounting and Finance

It provides tax advice and assistance, helping with credit- authorization decisions, selecting
forecasting models, providing investment advice.

Marketing

It provides establishing sales quotas, responding to customer inquiries, referring problems to

telemarketing centers, assisting with marketing timing decisions, determining discount
policies.

Manufacturing

It helps in determining whether a process is running correctly, analyzing quality and

providing corrective measures, maintaining facilities, scheduling job-shop tasks, selecting
transportation routes, assisting with product design and faculty layouts.

Personnel

It is useful in assessing applicant qualifications and assisting employees in filling out

forms.

General Business

It helps in assisting with project proposals, recommending acquisition strategies, educating

trainees, and evaluating performance.

Cognitive Science

Cognitive science is an area of artificial intelligence based on research in biology, neurology,

psychology, mathematics, and many allied disciplines.

It focuses on researching how the human brain works and how humans think and learn. The results of
such research in human information processing are the basis for the development of a variety of
computer-based applications in artificial intelligence.
 Applications in the cognitive science area of AI include the development of expert systems and other
knowledge-based systems that add a knowledge base and some reasoning capability to information
systems.

It includes adaptive learning systems that can modify their behaviors based on information they acquire
as they operate.

Robotics

Robotics is an interdisciplincary branch of engineering and science that includes mechanical

engineering, computer science and others.

It deals with design, construction, operation and use of

robot as well as computer system for their control, sensory feedback and information processing.

AI, engineering and physiology are the basic disciplines of robotics. This technology are used to
develop machines that can substitute for human. This area, thus, includes applications designed to
give robots the power of sight, visual perception, touch, locomotion, navigation, etc.

Natural Interfaces

Natural Interface or Natural User Interface (NUI) is a user interface that is effectively invisible and
remains invisible as the user continuously learns increasingly complex interactions.

The development of natural interfaces is considered as major area of AI applications and is essential to
the natural use of computers by humans.

For e.g. the development of natural languages and speech recognition are major thrusts of this area
of AI. Being able to talk to computers and robots in conversational human languages and have them
"understand" us as we understand each other is a goal of AI research. This goal involves research
and development in linguistics, psychology, computer science and other disciplines.

Other natural interface research application include the development of multisensory devices that
use a variety of body movements to operate computers, which is related to the emerging application
area of virtual reality. Virtual reality invloves using multisensory human computer interfaces that
enable human users to experience computer simulated objects, spaces, activities etc
Knowledge Engineering (KE)

Knowledge Engineering refers to all technical, scientific and social aspects involved in building,
maintaining and using knowledge-based systems. A knowledge engineer is a professional who
works with expert to captures the knowledge they possess.

The knowledge engineer then builds the knowledge base using an iterative, prototyping process until
the expert system is acceptable. Thus, knowledge engineers perform a role similar to that of systems
analysts in conventional information systems development.

Once the decision is made to develop an expert system, a team of one or more domain experts and
a knowledge engineer may be formed.

Experts skilled in the use of expert system shells could also develop their own expert system. If a shell is
used, fact and rules of thumb about specific domain can be defined and entered into a knowledge base
with the help of a rule editor or other knowledge acquisition tool. A limited working prototype of the
knowledge base is then constructed, tested and evaluated using the inference engine and user interface
programs of the shell.

The knowledge engineer and domain experts can modify the knowledge base, then retest the system
and evaluate the results. This process is repeated until the knowledge base and the shell result in an
acceptable expert system.

New Topic
Artificial Intillegence

Introduction

Artificial Intelligence (AI) refers to the simulation of human intelligence in machines that are
programmed to think and learn like humans.

It involves the development of computer systems capable of performing tasks that typically require
human intelligence, such as visual perception, speech recognition, decision-making, and problem-
solving.

AI can be categorized into two types: Narrow AI and General AI.

Narrow AI, also known as Weak AI, is designed to perform specific tasks within a limited domain.
Examples of narrow AI include virtual personal assistants like Siri and Alexa, recommendation systems,
and image recognition software.
On the other hand, General AI, also known as Strong AI or AGI (Artificial General Intelligence), refers
to AI systems that possess human-like intelligence and can understand, learn, and apply knowledge
across various domains. While significant progress has been made in narrow AI, achieving General AI
remains an ongoing area of research.

Artificial intelligence is future. The development of computer systems in such a way that it is capable
to perform works that require human intelligenc e is referred as AI.

AI encompasses a wide range of techniques, algorithms, and approaches aimed at replicating or

augmenting human cognitive abilities. Artificial intelligence has the potential to revolutionize numerous
industries, enhance productivity, and solve complex problems.

The goal of AI is to develop computers that can simulate the ability to think, as well as see, hear, walk,
and feel.

Attributes of Intelligent Behavior

1. Think and reason.

2. Use reason to solve problems.

3. Learn or understand from experience.

4. Acquire and apply knowledge.

5. Exhibit creativity and imagination.

6. Deal with complex or perplexing situations.

7. Respond quickly and successfully to new situation based on previous experiences and acquired

knowledge.

8. Recognize the relative importance of elements in a situation.

9. Handle ambiguous, incomplete or erroneous information

Use of AI in Accounting and Auditing Profession

Accountant's responsibilities often involve following long-established methodologies for information

analysis and professional standards for report preparation.
Specialized software already automates many accounting, tax, and audit data-gathering and processing
tasks and provides the results to professionals who use their professional judgment to review. AI has the
potential to completely transform the accountancy profession. In the near future, automation will
alleviate many cumbersome processes, such as bookkeeping and transaction coding, enabling
accountants to focus on advisory services and other higher-value work. As a result, the future will offer
smart applications that drive value for accountants and their clients.

Financial institutions have long used artificial neural network systems to detect charges or claims
outside of the norm, flagging these for human investigation

(To be Researched )

Note that AI applications can be grouped under three major areas-cognitive science, robotics, and
natural interfaces-though these classifications do overlap, and other classifications can be used.

Also note that expert systems are just one of many important AI applications.

Let's briefly review each of these major areas of AI and some of their current technologies.
 1. Cognitive Science

 Cognitive science is an interdisciplinary field that focuses on understanding the nature of

cognition, which refers to the mental processes and abilities involved in perception, thinking,
learning, memory, language, decision-making, and problem-solving.

 It combines insights and methodologies from various disciplines, including psychology,

neuroscience, computer science, linguistics, philosophy, and anthropology.

 Cognitive science aims to uncover how the mind works, how information is processed, and how
knowledge is acquired, represented, and used.

 Comparisons between Neuroscience and Cognitive Science

Neuroscience examines the neural basis of cognition by studying the structure and function of
the brain. It seeks to understand how neural networks and brain regions support cognitive
processes and how they interact to give rise to complex behaviors.

Artificial intelligence (AI) draws upon cognitive science to develop computer systems and
algorithms that simulate or replicate intelligent behavior. AI research focuses on areas such as machine
learning, natural language processing, computer vision, and knowledge representation.

 This area of artificial intelligence is based on research in biology, neurology psychology,

mathematics, and many allied disciplines.
  It focuses on researching how the human works and how humans think and learn. The results of
such research in human information processing are the basis for the development of a variety of
computer-based applications in artificial intelligence Applications in the cognitive science area of
AI include the development of expert systems and other knowledge-based systems that add a
knowledge base and some reasoning capability to information systems.

Applications

a. Expert System: Already done above

b. Neural networks:
Introduction

 Neural networks, also known as artificial neural networks (ANNs), are a key component
of artificial intelligence (AI) that mimic the structure and functioning of the human brain.

 They are composed of interconnected nodes, called neurons, which work together to
process and analyze complex patterns and relationships in data.

 Neural networks are computing systems modeled after the brain's mesh like network of
interconnected processing elements, called neurons.

 The three main layers are the input layer, hidden layer(s), and output layer. Of course,
neural networks are a lot simpler in architecture (the human brain is estimated to have
more than 100 billion neuron brain cells!).

 Like the brain, however, the interconnected processors in a neural network operate in
parallel and interact dynamically.

 Each neuron receives input signals, applies a specific activation function to the input,
and produces an output signal.

 The more data examples it receives as input, the better it can learn to duplicate the
results of the examples it processes.

 Neural networks have found applications in various domains, including image and
speech recognition, natural language processing, sentiment analysis, recommendation
systems, autonomous vehicles, financial forecasting, and medical diagnosis, among
others.
  Their ability to learn from large amounts of data and uncover intricate patterns makes
them powerful tools for solving complex problems.

 Neural networks have revolutionized the field of AI and are at the core of many
advanced machine learning algorithms. Their ability to model and learn from data has
enabled significant advancements in tasks that were previously challenging for
traditional programming approaches.

 For example, a neural network can be trained to learn which credit characteristics result
in good or bad loans.

c. Fuzzy Logic System

 Fuzzy logic systems are a branch of artificial intelligence that deals with reasoning and
decision-making in the presence of uncertainty or vagueness.
 Unlike traditional logic systems that operate with binary values (true or false), fuzzy logic
systems introduce the concept of partial truth and degrees of membership.(Comparison
with traditional method).
 Fuzzy logic is a method of reasoning that resembles human reasoning.

 Similar to human reasoning, it allows for approximate values and inferences (fuzzy logic) as
well as incomplete or ambiguous data (fuzzy data) instead of relying only on crisp data such
as binary (yes/no) choices.

 Fuzzy logic systems provide a framework for handling uncertainty and imprecision, allowing
for more flexible and human-like reasoning and decision-making.

 They have been successful in many real-world applications, particularly in situations where
crisp or binary logic systems may not be suitable.
 Fuzzy Logic in Business

 Examples of applications of fuzzy logic are numerous in Japan but rare in the United States.
The United States has preferred to use AI solutions like expert systems or neural networks,
but Japan has implemented many fuzzy logic applications, especially the use of special
purpose fuzzy logic microprocessor chips, called fuzzy process controllers.

 Thus, the Japanese ride on subway trains, use elevators, and drive cars that are guided or
supported by fuzzy process controllers made by Hitachi and Toshiba.

 Many models of Japanese-made products also feature fuzzy logic microprocessors. The list is
growing and includes autofocus cameras, auto stabilizing camcorders, energy-efficient air
conditioners, self-adjusting washing machines, and automatic transmissions.

 Fuzzy logic can be used in credit scoring models to assess the credit worthiness of
individuals based on a combination of factors with varying degrees of importance and
uncertainty.

 It can evaluate risk factors, such as market volatility, economic conditions, or operational
uncertainties, and provide a more nuanced assessment of potential risks.

 It can aid in customer segmentation, which involves categorizing customers into distinct
groups based on their characteristics or behavior.

 Also, it can be used in quality control processes to handle imprecise measurements and
variability in product attributes and can help identify and manage deviations from desired
standards.

d. GENETIC ALGORITHMS

 Genetic algorithms (GAs) are computational search and optimization techniques inspired by the
principles of natural evolution and genetics.

 They are used to solve complex problems by mimicking the process of natural selection,
reproduction, and genetic variation.

 Genetic algorithms operate on a population of potential solutions and iteratively evolve the
population to find the best solution or approximate solutions to a given problem.
 The use of genetic algorithms is a growing application of artificial intelligence.

 Genetic algorithm software uses Darwinian (survival of the fittest), randomizing, and other
mathematical functions to simulate an evolutionary process that can yield increasingly better
solutions to a problem.

 Genetic algorithms were first used to simulate millions of years in biological, geological, and
ecosystem evolution in just a few minutes on a computer. Genetic algorithm software is being
used to model a variety of scientific, technical, and business processes.

 Genetic algorithms are especially useful for situations in which thousands of solutions are
possible and must be evaluated to produce an optimal solution.

 This process may involve trying random process combinations (mutation), combining parts of
several good processes (crossover), and selecting good sets of processes and discarding poor
ones (selection) to generate increasingly better solutions.

Advantages of Genetic Algorithms

 Genetic algorithms have been successfully applied to a wide range of optimization and search
problems, including parameter optimization, scheduling, routing, machine learning, and
resource allocation, among others.

 They offer advantages in handling complex, non-linear, and multi-objective problems where
traditional optimization techniques may struggle.

 By imitating the principles of natural evolution, genetic algorithms provide an efficient and
effective approach for finding near-optimal or approximate solutions in various domains.

2. Robotics (mathi pani gareko xa but this is more detail and ali ramro)

 Robotics is a field that involves the design, development, and operation of robots.

 It combines knowledge from various disciplines such as mechanical engineering,

electrical engineering, computer science, and artificial intelligence to create intelligent
machines that can perform tasks autonomously or with human guidance.

 Robotics involves the design and construction of physical robots. This includes selecting
appropriate materials, components, and actuators to create mechanical systems
capable of physical interaction with the environment.
  Robot design also considers factors such as size, weight, mobility, and sensory
capabilities based on the intended application.

 Then, Perception is a crucial aspect of robotics.

 Robots need to sense and understand the surrounding environment to make informed
decisions and perform tasks.
 Sensors such as cameras, lidar, infrared, and tactile sensors are used to capture
information about the environment, including objects, obstacles, and their spatial
relationships.

 Robotics also involves developing control systems to govern the movement and actions
of robots. This includes algorithms for motion planning, trajectory generation, and
feedback control to ensure precise and efficient robot movements.

 Actuators such as motors, pneumatic systems, and hydraulics are used to actuate the
robot's physical motions.

 Here the term Localization refers to the ability of a robot to determine its own position
within its environment.

AI, engineering, and physiology are the basic disciplines of robotics. This technology produces
robot machines with human-like computer intelligence and computer-controlled humanlike
physical capabilities.

This area, thus, includes applications designed to give robots the powers of sight, or visual
perception; touch or tactile capabilities; dexterity, or skill in handling and manipulation;
locomotion, or the physical ability to move over any terrain; and navigation, or the intelligence
to find one's way to a destination.

Use:
 Intelligent robots can make decisions, recognize patterns, and improve their
performance over time.

 Robotics finds applications in various industries and sectors.

 In manufacturing, robots are used for tasks such as assembly, welding, and material
handling to improve efficiency and precision.
 Robots are also employed in healthcare for surgical procedures, rehabilitation, and
assistance to people with disabilities.

 In agriculture, robots are used for crop monitoring, harvesting, and precision farming.

 Other areas of application include logistics, exploration, defense, and entertainment.

Robotics is a rapidly evolving field with ongoing advancements in hardware, software,

and algorithms. It holds the promise of transforming various industries and improving
our quality of life by enabling robots to perform complex tasks, enhance productivity,
and assist humans in various domains.

3. Natural Interfaces

 Natural interfaces refer to user interfaces that allow users to interact with technology in
a way that closely resembles natural human communication and behavior. These
interfaces aim to bridge the gap between humans and machines by enabling intuitive
and seamless interactions.

 The development of natural interfaces is considered a major area of AI applications and

is essential to the natural use of computers by humans. For example, the development
of natural languages and speech recognition are major thrusts of this area of AI.

 Being able to talk to computers and robots in conversational human languages and have
them "understand" us as we understand each other is a goal of AI research. This goal
involves research and development in linguistics, psychology, computer science,and
other disciplines.

 Other natural interface research applications include the development of multisensory devices
that use a variety of body movements to operate computers, which is related to the emerging
application area of virtual reality.
 Speech recognition is a natural interface that allows users to interact with technology using
spoken language. It involves converting spoken words into written text or commands that can
be understood by computers. This technology enables users to dictate text, issue voice
commands to devices, and interact with virtual assistants like Siri or Alexa.

 Gesture recognition enables users to interact with technology through physical gestures or
movements. It involves using cameras or sensors to track and interpret hand movements, body
postures, or facial expressions. Gesture recognition is used in applications such as gaming,
virtual reality, and smart devices to control actions or navigate interfaces without the need for
physical input devices.

 On the other hand, Touch interfaces have become ubiquitous in modern technology. They allow
users to interact directly with graphical elements on touch-sensitive screens using their fingers
or stylus. Touch interfaces are prevalent in smartphones, tablets, and interactive kiosks,
providing users with intuitive and tactile control over various applications and functions.

 Further, Natural Language Processing (NLP) is a field of artificial intelligence that focuses on
enabling computers to understand and respond to human language in a natural way. NLP
technologies analyze and interpret the meaning of text or speech, allowing users to
communicate with technology using natural language. This includes applications like chatbots,
language translation, and sentiment analysis.

 Virtual reality (VR) and augmented reality (AR) technologies create immersive and interactive
experiences by blending the digital world with the physical world. These interfaces enable users
to engage with virtual environments or overlay digital information onto their real-world
surroundings, enhancing natural interaction through spatial awareness and realistic simulations.

 The Biometric interfaces utilize unique biological characteristics for authentication and
interaction. Biometric technologies include fingerprint recognition, iris or retinal scanning, facial
recognition, and voice recognition. These interfaces offer secure and personalized interactions,
allowing users to access devices or systems based on their distinct biological traits.

 Brain-computer interfaces (BCIs) establish a direct communication pathway between the human
brain and computers or external devices. BCIs capture and interpret brain signals, enabling users
to control technology or communicate without physical input. These interfaces have potential
applications in assistive technology, neurorehabilitation, and enhanced communication for
individuals with disabilities.

 Natural interfaces aim to simplify human-computer interactions by leveraging familiar and

intuitive communication methods.
Interrelationships among Systems (New Topic)

 In any organization or system, there are interrelationships among different systems that
collectively contribute to the functioning and performance of the overall entity.

 These interrelationships can be complex and interconnected, and understanding them is crucial
for effective management and decision- making.

 Here are some common interrelationships among systems:

 Transaction processing systems (TPS) are typically a major source of data for other systems,
whereas Executive Support Systems (ESS) are primarily a recipient of data from lower- level
systems. The other types of systems may exchange data with each other as well.

 Data may also be exchanged among systems serving different functional areas. For example, an
order captured by a sales system may be transmitted to a manufacturing system as a transaction
for producing or delivering the product specified in the order or to a Management Information
Systems (MIS) for financial reporting.
 The various types of systems in the organization have interdependencies. TPS are major
producers of information that is required by the other systems, which, in turn, produce
information for other systems. These different types of systems have been loosely
coupled in most organizations.

 It is definitely advantageous to integrate these systems so that information can flow

easily between different parts of the organization and provide management with an
enterprise-wide view of how the organization is performing as a whole.

 But integration costs money, and integrating many different systems is extremely time
consuming and complex. This is a major challenge for large organizations, which are
typically saddled with hundreds, even thousands of different applications serving
different levels and business functions.
  Each organization must weigh its needs for integrating systems against the difficulties of
mounting a large-scale systems integration effort.

Sales and marketing information systems

Sales : It is concerned with contacting customer, selling the product & services, taking order and
following up on sales.

Marketing : Marketing is concerned with identifying the customers for the firm's products or services,
determining what customers need or want, planning and developing products and services to meet
their needs, and advertising and promoting these products and services.
.

At Strategic Level:
Sales and marketing systems monitor trends affecting new product and sales opportunities, support
planning for new product & services, and monitor the performance of competitors.

At Management Level:
Sales & Marketing systems support market research, advertising and promotional campaigns and
pricing decisions. They analyze sales performance and the performance of sales staff.

At operational Level:
Sales & Marketing system assist in locating and contacting prospective customers, tracking sales,
processing orders and providing customer service support.

 In the recent year sales and marketing information system have shown significant impact on
organizations.
 One key impact is the ability to gain enhanced customer insights by gathering large amounts of
customer data including demographics, preferences, and behaviour patterns.
 This deeper understanding of customers enables businesses to tailor their marketing strategies
and deliver personalized experiences, ultimately improving customer enagements to our
products and services.

 Further the sales automation tools is streamlining various sales processes, such as lead
management, order processing, and inventory management.

 These tools reduce administrative tasks and eliminates manual work, resulting in increased sales
efficiency, shorter sales cycle, and more time for sales teams to focus on building relationship
and closing deals.

 Furthermore, SMIS enable businesses to develop and execute personalized marketing

campaigns.
 Overall, SMIS have revolutionized sales and marketing by providing organizations with the tools
and insights needed to better understand their customers, streamline sales processes, and
deliver personalized experiences.

 These advancements have resulted in improved customer satisfaction, increased sales

efficiency, and more effective marketing strategies, ultimately driving business growth and
success.

Manufacturing and Production Information Systems

 Manufacturing and production function is responsible for actually producing the firm's goods &
services.

 It deals with planning, development, and maintenance of production facilities,

establishment of production goals, the acquisition, storage and availability of production
materials and the scheduling of equipment, facilities, materials and labor required to fashion
finished products.

Advantages:

 Manufacturing and production information systems support these activities. With accurate data
and advanced algorithms, MPIS can optimize scheduling, allocate resources effectively, and
minimize production bottlenecks.

 By streamlining the planning and scheduling processes, organizations can ensure timely delivery,
reduce lead times, and maximize the utilization of resources.

 Information systems can guide the actions of machines and equipment to help pharmaceutical
and other types of firms monitor and control the manufacturing process.

 MPIS also facilitate real-time monitoring and control of manufacturing processes. By integrating
with production equipment and sensors, these systems collect data on machine performance,
quality metrics, and production outputs.

 This real-time data enables organizations to identify potential issues or deviations from
standards, allowing for immediate corrective actions.
At Strategic Level:

Strategic-level manufacturing systems deal with the firm's long-term manufacturing goals, such
as where to locate new plants or whether to invest in new manufacturing technology

At Management Level:

At the Management level, manufacturing and production system analyze and monitor
manufacturing and production costs and resources.

At Operational Level:
Operational manufacturing and Production System deal with the status of production tasks like
material movement control, ordering items & replacing expired /damaged items.

 Overall, MPIS have revolutionized manufacturing and production by providing

organizations with the tools and insights needed to optimize production planning,
monitor processes in real-time, and manage inventory efficiently.
 These systems contribute to improved productivity, reduced costs, enhanced product
quality, and better decision-making, ultimately leading to increased customer
satisfaction and competitive advantage in the marketplace.

Product Life Cycle Management (PLM)

 It is one type of manufacturing and production system that has become increasingly
valuable in the automotive, aerospace and consumer products industries.
 PLM systems are based on a data repository that organizes every piece of information
that goes into making a particular product such as formula cards, packaging information,
shipping specifications and patent data.
 Once all these data are available, companies can select and combine the data they need
to serve specific functions. For e.g., designers and engineers can use the data to
determine which parts are needed for a new design, whereas retailers can use them to
determine self height and how materials should be stored in warehouse.

 For many years, engineering-intensive industries have used computer-aided design

(CAD) systems to automate the modeling and design of their products.

The software enables users to create a digital model of a part, a product, or a structure
and make changes to the design on the computer without having to build physical
prototypes.
  PLM software goes beyond CAD software to include not only automated modeling and
design capabilities but also tools to help companies manage and automate materials
sourcing, engineering change orders, and product documentation, such as test results,
product packaging, and post sales data.

Finance and Accounting Information Systems

Finance:

o It is responsible for managing the firm's financial assets such as cash, stocks, bonds
and other investments to maximize the return on these financial assets.

o The finance function is also in charge of managing the capitalization of the firm
(finding new financial assets in stocks, bonds, or other forms of debt).

o To determine whether the firm is getting the best return on its investments, the
finance function must obtain a considerable amount of information from sources
external to the firm.

Accounting :

o The accounting function is responsible for maintaining and managing the firm's
financial records-receipts, disbursements, depreciation, and payroll- to account for
the flow of funds in a firm.

Problem:

Finance and accounting share related problems-how to keep track of a firm's financial assets and fund
flows. They provide answers to questions such as these: What is the current inventory of financial
assets? What records exist for disbursements, receipts, payroll, and other fund flows?

Advantages:

FAIS streamline financial processes by automating tasks such as data entry, invoice processing, and
financial reconciliations.

By eliminating manual processes and reducing the reliance on paper-based documentation, FAIS
increase efficiency and reduce the likelihood of errors. This saves time and resources for finance and
accounting teams, allowing them to focus on value-added activities such as financial analysis and
strategic planning.
At Strategic Level:

Strategic-level systems for the finance and accounting function establish long-term
investment goals for the firm and provide long-range forecasts of the firm's financial
performance.

At Management Level:

At the management level, information systems help managers oversee and control the
firm's financial resources.

At Operational Level:

Operational systems in finance and accounting track the flow of funds in the firm
through transactions such as paychecks, payments to vendors, securities reports, and
receipts.

Overall, finance and accounting information systems have transformed financial

management by automating processes, improving data accuracy, and enabling informed
decision-making.

These systems enhance efficiency, reduce errors, and provide timely and reliable
financial information, contributing to effective financial planning, compliance, and
overall organizational success.
Human Resources Information Systems

Human resources function is responsible for attracting, developing and maintaining the
firm's workforce. Human resources information systems support activities such as
identifying potential employees, maintaining complete records on existing employee
and creating programs to develop employee's talents and skills.

 Human Resources Information Systems (HRIS) are specialized systems designed

to support human resource management processes within an organization.

 These systems integrate various HR functions and activities, ranging from

employee recruitment and onboarding to performance management and
payroll administration.

 HRIS streamlines HR processes, improves data accuracy, and enhances

employee management.

At Strategic Level:
Strategic-level human resources systems identify the manpower requirements (skills,
educational level, types of positions, number of positions, and cost) for meeting the
firm's long-term business plans

At Management Level:
At the management level, human resources systems help managers monitor and
analyze the recruitment, allocation, and compensation of employees.

At Operational Level:
Human resource systems track the recruitment and placement of the firm's employees.