What is Procurement Management?

Procurement management is the systematic approach used for buying all the goods and
services needed for a company to stay sustainable. Manage your procurement well, and it
will add value to all your business practices and save you both time and money.
Major themes
1
Identification of need – When the company needs goods/services, the company’s needs must
be identified in order to choose which type of service or product will fit best. Then the buyer
needs to find them at the best quality for the best price while also making sure the supplier is
able to deliver.
2
Finding and qualifying the suppliers – Using the Internet or your supplier databases, you
assemble a list of all potential product and/or service providers. Sometimes it’s useful to run
RFIs or gather additional information, like years on the market and turnover rates, to pre-
qualify suppliers.
3
Requesting proposals – To make sure you buy the products or services under the best
conditions – price, quality, etc. – you request proposals. Based on the results, you know with
whom to start negotiations. The RFP results can be considered an overview of current market
capability.
4
Negotiating with suppliers – To achieve the best conditions regarding prices, terms and
delivery, you negotiate with suppliers. It’s especially essential if it’s the first time you are
working with them. This process can help you evaluate their trustworthiness as well.
5
Contracting – If both parties, the buyer and the supplier, agree on all terms (pricing, delivery,
quality, etc.) you can make it official by signing a contract.
6
Delivery – Throughout the delivery process, you need to evaluate the products and services
delivered to ensure they are what you had planned to buy, they meet your quality standards,
they arrive on schedule and you are charged the prices outlined in the contract.
7
Analyzing results – Once the project is complete, it is essential to analyze the process and
evaluate its success as well as record observations for future projects. You may need to present
the outcomes to company management or relevant stakeholders. The results can be used the
next time you need to make a similar purchase.
Buy the products and services your company needs
Buying the goods and services your company needs on time, of the best quality and at the best
price.
That’s procurement management your company will value.
The Four Procurement Management Actions

Plan
Procurement management starts with figuring what your company needs to achieve its long-
term business goals.
To do this, start by meeting with company executives and stakeholders (i.e. finance, company
owners, marketing, production, suppliers, customers of the procurement department customers,
etc.) All of these stakeholders usually have specific needs with regards to procurement
management.
The procurement team should be aware of what is needed to satisfy the needs of internal, as
well as external, customers.
Once this is done, formulate your findings into one document. These guidelines will become
your procurement policy, which will help you execute the processes.
Business goals and objectives – The primary goal of a smooth procurement management
process is to help the company achieve its business goals. Once these goals are defined, you
find ways to help meet them through better procurement management.
Stakeholder needs – Our stakeholders usually have specific expectations and needs with
regards to procurement. The best way to define them is by meeting with these stakeholders,
using surveys or hiring external research providers. This should be an ongoing process since
needs and expectations may change frequently.
Current capability – Analyzing your team and current procurement process capabilities will
help you understand where you are today and what kinds of skills, resources and tools are
needed to execute plans in the future.
Procurement policy – Formulate all your findings and plans into one document. These
guidelines, which can now be called your procurement policy, declare how all processes have
to be carried out.
The policy should be presented to all parties involved. Then the company board signs it, and
the company begins to follow it for all procurement processes.

Align
Value your procurement team and work to keep them highly motivated, informed and trained.
At the same time, ask yourselves if your current team has all the necessary skills, motivation
and resources to carry out the processes defined in the procurement policy. You may find that
you need to train team members, increase their motivation or supplement their resources. Make
sure the team has deep knowledge of the specific industry areas required to procure the needed
goods and services for the company.
If you need to hire new team members, look first inside your company and then look at external
options.
Skilled Team – Procurement is in a constant state of flux. The industry you operate in as well
as modern procurement methods, software and big data are changing the procurement
landscape. You need keep your team on top of the latest developments through training and
participating in professional organizations and industry conferences.
Motivational Work Environment – Your team should participate in analyzing and planning
procurement processes, ensuring they are aware of the steps required to document and complete
the processes without delays or confrontations leading to discontentment and subpar
productivity. You should run regular employee satisfaction surveys and use the results to keep
the work environment as motivational as possible.
Strategic partners – They are suppliers with whom you have a close relationship and your
wellbeing depends on the products and services they deliver. You need to develop your long-
term plans and strategies together with your strategic partners, treating them as if they were
team members you can’t afford to lose.
Centralized, decentralized and central-led procurement process – You should decide what
is the best way to set up the procurement management processes in your company. It could be
centralized, where all the activities are run by the procurement department, or decentralized,
where every department is in charge of their own activities, or center-led, which is a
combination of the two.

Procure
Now you need to set up a streamlined and efficient process to support your highly motivated,
skilled team. This way you make sure they focus on satisfying the needs of their internal
customers and don’t waste time dealing with bureaucracy.
Selecting the right tools will make it easy to follow the procurement process, get a real-time
overview and reduce manual work, saving buyers’ valuable time.
The following methods should be part of your communication with suppliers. When dealing
with strategic partners, the process can be even more personalized.
Finding suppliers – You should constantly refresh your supplier list by looking for new ones
online, at trade fairs, etc. Doing that ensures you keep bidding competition high and find
vendors that can give you a competitive advantage over your rivals.
Tender and RFP processes – You should use tendering methods like RFPs, RFIs, RFQs and
reverse auctions to qualify suppliers and ask for bids. Based on their bids you can filter out the
suppliers that will help you acquire the highest quality and cost standard products and services
on the market.
High and low value requests – For running strategic and high value requests you can use more
qualitative methods. Running these requests requires skills, tools, attention to detail, and more
resources. Your low value requests may be run by more quantitative ways: for example, by
selecting the best of three received bids.
Negotiations – You should use qualitative procurement methods to determine if suppliers are
trustworthy and their products/services are of top quality, to negotiate price, and to minimize
delivery risks.
Contracting and delivery – Once you select the best product/service provider, sign a contract
with the terms that both parties have agreed to. After starting to work together, constantly be on
the look out to make sure the products/services are delivered on time and with the expected
quality.
Manage
To keep the procurement processes transparent for buyers, suppliers and stakeholders, it’s
essential for the executives (procurement managers) to have a full overview of the process. This
ensures accountability, helps improve procurement processes and allows them to coordinate the
team’s workload.
You need a clear chain of command in order to achieve accountability and define measurable
objectives for the team. Then you should consistently and transparently follow up on those
objectives.
Keep all involved parties well informed about the processes, including benchmarking and
reporting. This means they should be clearly visible and not done behind someone’s back.
Supervising procurement – Make sure all the processes are run according to the procurement
policy and best practices for eliminating the risk of fraud and maverick spend. All involved
parties should be well aware of the processes being supervised.
Analyzing processes – To improve your activities, periodically analyze your ongoing
procurement activities, like RFP processes, spend across different categories, low value- vs.
high-value requests, team performance, etc. You should have all this information on one central
procurement dashboard.
Benchmarking and KPIs – Measure your success by consistently monitoring the performance
of KPIs and set up a benchmarking process. These are the metrics that reveal the success of
procurement management.
Reporting – The procurement manager reports at set intervals to company management, to
other stakeholders and to the procurement team. By keeping the process transparent, you can
make sure all involved parties are on the same page.
Ongoing procurement improvement – To deliver top performance, refine our procurement
processes when necessary, but also understand that this is an ongoing task. For example, some
improvements may require rewriting the policy, others may require better coordination of team
resources.

Enjoy
Successful procurement management has a lucrative impact on a company’s processes. It helps
stakeholders meet their goals. It also helps minimize supply chain risks by better collaborating
with strategic partners and providing added value to all business practices.
The positive impact on your business processes can be seen in higher quality product/service
inflow, on-time deliveries and cost savings, which keeps your supply chain sustainable.
By streamlining these processes, you will notice fewer business risks and hold those involved
in the processes accountable, which will guarantee quantifiable results.
Helping meet business goals and stakeholder expectations – Procurement management helps
you rise to meet stakeholders’ expectations and meet their needs. It helps them perform on
higher level and also helps them meet business goals in the long run.
Savings – Savings can be achieved in a variety of ways, like reducing delivery errors or
increasing quality of products and services. You can also measure the direct cost and the team
timesaving achieved through better procurement management.
Higher value and lower supply chain risks – Building closer relations with your strategic
partners will minimize supply chain risks. Combining your strengths with partners’ helps find
new innovative solutions to stay ahead of the competition.
Streamlined and easy to follow processes – You should value a full overview of simplified,
standardized processes that are easy to follow for both management and buyers.
 MIS - Customer Relationship Management
CRM is an enterprise application module that manages a company's interactions with current
and future customers by organizing and coordinating, sales and marketing, and providing
better customer services along with technical support.
Atul Parvatiyar and Jagdish N. Sheth provide an excellent definition for customer relationship
management in their work titled - 'Customer Relationship Management: Emerging Practice,
Process, and Discipline':
Customer Relationship Management is a comprehensive strategy and process of acquiring,
retaining, and partnering with selective customers to create superior value for the company and
the customer. It involves the integration of marketing, sales, customer service, and the supply-
chain functions of the organization to achieve greater efficiencies and effectiveness in
delivering customer value.
Why CRM?
 To keep track of all present and future customers.

 To identify and target the best customers.

 To let the customers know about the existing as well as the new products and services.
 To provide real-time and personalized services based on the needs and habits of the
existing customers.
 To provide superior service and consistent customer experience.
 To implement a feedback system.
Scope of CRM

Advantages of CRM
 Provides better customer service and increases customer revenues.

 Discovers new customers.

  Cross-sells and up-sells products more effectively.
 Helps sales staff to close deals faster.
 Makes call centers more efficient.
 Simplifies marketing and sales processes.
Disadvantages of CRM
 Some times record loss is a major problem.

 Overhead costs.
 Giving training to employees is an issue in small organizations.

customer relationship management

(CRM)

 Customer relationship management (CRM) is a term that refers to

practices, strategies and technologies that companies use to
manage and analyze customer interactions and data throughout the
customer lifecycle, with the goal of improving business
relationships with customers, assisting in customer retention and
driving sales growth. CRM systems are designed to compile
information on customers across different channels -- or points of
contact between the customer and the company -- which could
include the company's website, telephone, live chat, direct mail,
marketing materials and social media. CRM systems can also give
customer-facing staff detailed information on customers' personal
information, purchase history, buying preferences and concerns.

 CRM software consolidates customer information and documents into a single CRM
database so business users can more easily access and manage it. The other main functions
of this software include recording various customer interactions (over email, phone calls,
social media or other channels, depending on system capabilities), automating various
workflow processes such as tasks, calendars and alerts, and giving managers the ability to
track performance and productivity based on information logged within the system.
 MIS - Supply Chain Management
Supply chain management is the systemic, strategic coordination of the traditional business
functions and tactics across these business functions - both within a particular company and across
businesses within the supply chain- all coordinated to improve the long-term performance of the
individual companies and the supply chain as a whole.
In a traditional manufacturing environment, supply chain management meant
managing movement and storage of raw materials, work-in-progress inventory, and
finished goods from point of origin to point of consumption.

It involves managing the network of interconnected smaller business units, networks of

channels that take part in producing a merchandise of a service package required by
the end users or customers.

With businesses crossing the barriers of local markets and reaching out to a global
scenario, SCM is now defined as:
Design, planning, execution, control, and monitoring of supply chain activities with the objective of
creating net value, building a competitive infrastructure, leveraging worldwide logistics,
synchronizing supply with demand and measuring performance globally.
SCM consists of:
 operations management
 logistics
 procurement
 information technology
 integrated business operations
Objectives of SCM
 To decrease inventory cost by more accurately predicting demand and scheduling production to match
it.
 To reduce overall production cost by streamlining production and by improving information flow.
 To improve customer satisfaction.
Features of SCM
Scope of SCM

SCM Processes
 Customer Relationship Management

 Customer Service Management

 Demand Management
  Customer Order Fulfillment

 Manufacturing Flow Management

 Procurement Management

 Product Development and Commercialization

 Returns Management

Advantages of SCM
SCM have multi-dimensional advantages:

 To the suppliers:

o Help in giving clear-cut instruction

o Online data transfer reduce paper work

 Inventory Economy:

o Low cost of handling inventory

o Low cost of stock outage by deciding optimum size of replenishment orders

o Achieve excellent logistical performance such as just in time

 Distribution Point:

o Satisfied distributor and whole seller ensure that the right products reach the right
place at right time

o Clear business processes subject to fewer errors

o Easy accounting of stock and cost of stock

 Channel Management:

o Reduce total number of transactions required to provide product assortment

o Organization is logically capable of performing customization requirements

 Financial management:

o Low cost

o Realistic analysis

 Operational performance:

o It involves delivery speed and consistency.

 External customer:

o Conformance of product and services to their requirements

o Competitive prices
 o Quality and reliability

o Delivery

o After sales services

 To employees and internal customers:

o Teamwork and cooperation

o Efficient structure and system

o Quality work

o Delivery

Ethical & Security Issues in Information System

Information systems have made many businesses successful today. Some companies such as
Google, Facebook, EBay, etc. would not exist without information technology. However, improper
use of information technology can create problems for the organization and employees.

Criminals gaining access to credit card information can lead to financial loss to the owners of the
cards or financial institute. Using organization information systems i.e. posting inappropriate
content on Facebook or Twitter using a company account can lead to lawsuits and loss of
business.

This tutorial will address such challenges that are posed by information systems and what can be
done to minimize or eliminate the risks.

In this tutorial, you will learn –

 Cyber-crime
 Information system Security
 Information system Ethics
 Information Communication Technology (ICT) policy

Cyber-crime
Cyber-crime refers to the use of information technology to commit crimes. Cyber-crimes can
range from simply annoying computer users to huge financial losses and even the loss of human
life. The growth of smartphones and other high-end Mobile devices that have access to the
internet have also contributed to the growth of cyber-crime.

MIS - Enterprise Resource Planning

ERP is an integrated, real-time, cross-functional enterprise application, an enterprise-
wide transaction framework that supports all the internal business processes of a
company.

It supports all core business processes such as sales order processing, inventory
management and control, production and distribution planning, and finance.
Why of ERP?
ERP is very helpful in the follwoing areas:

 Business integration and automated data update

 Linkage between all core business processes and easy flow of integration

 Flexibility in business operations and more agility to the company

 Better analysis and planning capabilities

 Critical decision-making

 Competitive advantage

 Use of latest technologies

Features of ERP
The following diagram illustrates the features of ERP:
Scope of ERP
 Finance: Financial accounting, Managerial accounting, treasury management, asset
management, budget control, costing, and enterprise control.

 Logistics: Production planning, material management, plant maintenance, project

management, events management, etc.

 Human resource: Personnel management, training and development, etc.

 Supply Chain: Inventory control, purchase and order control, supplier scheduling, planning,
etc.

 Work flow: Integrate the entire organization with the flexible assignment of tasks and
responsibility to locations, position, jobs, etc.

Advantages of ERP
 Reduction of lead time

 Reduction of cycle time

 Better customer satisfaction

 Increased flexibility, quality, and efficiency

 Improved information accuracy and decision making capability

 Onetime shipment

 Improved resource utilization

 Improve supplier performance

  Reduced quality costs

 Quick decision-making

 Forecasting and optimization

 Better transparency

Disadvantage of ERP
 Expense and time in implementation

 Difficulty in integration with other system

 Risk of implementation failure

 Difficulty in implementation change

 Risk in using one vendor

Ethical & Security Issues in Information System
Information systems have made many businesses successful today. Some companies such as
Google, Facebook, EBay, etc. would not exist without information technology. However, improper
use of information technology can create problems for the organization and employees.

Criminals gaining access to credit card information can lead to financial loss to the owners of the
cards or financial institute. Using organization information systems i.e. posting inappropriate
content on Facebook or Twitter using a company account can lead to lawsuits and loss of
business.

This tutorial will address such challenges that are posed by information systems and what can be
done to minimize or eliminate the risks.

In this tutorial, you will learn –

 Cyber-crime
 Information system Security
 Information system Ethics
 Information Communication Technology (ICT) policy

Cyber-crime
Cyber-crime refers to the use of information technology to commit crimes. Cyber-crimes can
range from simply annoying computer users to huge financial losses and even the loss of human
life. The growth of smartphones and other high-end Mobile devices that have access to the
internet have also contributed to the growth of cyber-crime.
Types of cyber-crime

Identity theft

Identity theft occurs when a cyber-criminal impersonates someone else identity to practice
malfunction. This is usually done by accessing personal details of someone else. The details
used in such crimes include social security numbers, date of birth, credit and debit card numbers,
passport numbers, etc.

Once the information has been acquired by the cyber-criminal, it can be used to make purchases
online while impersonating himself to be someone else. One of the ways that cyber-criminals use
to obtain such personal details is phishing. Phishing involves creating fake websites that look
like legitimate business websites or emails.

For example, an email that appears to come from YAHOO may ask the user to confirm their
personal details including contact numbers and email password. If the user falls for the trick and
updates the details and provides the password, the attacker will have access to personal details
and the email of the victim.

If the victim uses services such as PayPal, then the attacker can use the account to make
purchases online or transfer funds.

Other phishing techniques involve the use of fake Wi-Fi hotspots that look like legitimate ones.
This is common in public places such as restaurants and airports. If an unsuspecting user logons
into the network, then cyber-crimes may try to gain access to sensitive information such as
usernames, passwords, credit card numbers, etc.

According to the US Department of Justice, a former state department employee used email
phishing to gain access to email and social media accounts of hundreds of women and accessed
explicit photos. He was able to use the photos to extort the women and threatened to make the
photos public if they did not give in to his demands.

Copyright infringement

Piracy is one of the biggest problems with digital products. Websites such as the pirate bay are
used to distribute copyrighted materials such as audio, video, software, etc. Copyright
infringement refers to the unauthorized use of copyrighted materials.

Fast internet access and reducing costs of storage have also contributed to the growth of
copyright infringement crimes.

Click fraud

Advertising companies such as Google AdSense offer pay per click advertising services. Click
fraud occurs when a person clicks such a link with no intention of knowing more about the click
but to make more money. This can also be accomplished by using automated software that
makes the clicks.

Advance Fee Fraud

An email is sent to the target victim that promises them a lot of money in favor of helping them to
claim their inheritance money.

In such cases, the criminal usually pretends to be a close relative of a very rich well-known
person who died. He/she claims to have inherited the wealth of the late rich person and needs
help to claim the inheritance. He/she will ask for financial assistance and promise to reward later.
If the victim sends the money to the scammer, the scammer vanishes and the victim loses the
money.

Hacking

Hacking is used to by-pass security controls to gain unauthorized access to a system. Once the
attacker has gained access to the system, they can do whatever they want. Some of the
common activities done when system is hacked are;

 Install programs that allow the attackers to spy on the user or control their system remotely
 Deface websites
 Steal sensitive information. This can be done using techniques such as SQL Injection,
exploiting vulnerabilities in the database software to gain access, social engineering
techniques that trick users into submitting ids and passwords, etc.

Computer virus

Viruses are unauthorized programs that can annoy users, steal sensitive data or be used to
control equipment that is controlled by computers.

Information system Security

MIS security refers to measures put in place to protect information system resources from
unauthorized access or being compromised. Security vulnerabilities are weaknesses in a
computer system, software, or hardware that can be exploited by the attacker to gain
unauthorized access or compromise a system.
People as part of the information system components can also be exploited using social
engineering techniques. The goal of social engineering is to gain the trust of the users of the
system.

Let's now look at some of the threats that information system face and what can be done to
eliminate or minimize the damage if the threat were to materialize.

Computer viruses – these are malicious programs as described in the above section. The
threats posed by viruses can be eliminated or the impact minimized by using Anti-Virus software
and following laid down security best practices of an organization.

Unauthorized access – the standard convention is to use a combination of a username and a

password. Hackers have learnt how to circumvent these controls if the user does not follow
security best practices. Most organizations have added the use of mobile devices such as
phones to provide an extra layer of security.

Let's take Gmail as an example, if Google is suspicious of the login on an account, they will ask
the person about to login to confirm their identity using their android powered mobile devices or
send an SMS with a PIN number which should supplement the username and password.

If the company does not have enough resources to implement extra security like Google, they
can use other techniques. These techniques can include asking questions to users during signup
such as what town they grew up in, the name of their first pet, etc. If the person provides
accurate answers to these question, access is granted into the system.

Data loss – if the data center caught fire or was flooded, the hardware with the data can be
damaged, and the data on it will be lost. As a standard security best practice, most organizations
keep backups of the data at remote places. The backups are made periodically and are usually
put in more than one remote area.
Biometric Identification – this is now becoming very common especially with mobile devices such
as smartphones. The phone can record the user fingerprint and use it for authentication
purposes. This makes it harder for attackers to gain unauthorized access to the mobile device.
Such technology can also be used to stop unauthorized people from getting access to your
devices.

Information system Ethics

Ethics refers to rules of right and wrong that people use to make choices to guide their behaviors.
Ethics in MIS seek to protect and safeguard individuals and society by using information systems
responsibly. Most professions usually have defined a code of ethics or code of conduct
guidelines that all professionals affiliated with the profession must adhere to.

In a nutshell, a code of ethics makes individuals acting on their free will responsible and
accountable for their actions. An example of a Code of Ethics for MIS professionals can be found
on the British Computer Society (BCS) website.

Information Communication Technology (ICT) policy

An ICT policy is a set of guidelines that defines how an organization should use information
technology and information systems responsibly. ICT policies usually include guidelines on;

 Purchase and usage of hardware equipment and how to safely dispose them
 Use of licensed software only and ensuring that all software is up to date with latest
patches for security reasons
 Rules on how to create passwords (complexity enforcement), changing passwords, etc.
 Acceptable use of information technology and information systems
 Training of all users involved in using ICT and MIS
 PLANNING, DESIGNING AND IMPLEMENTATION OF MIS
Planning of Information Systems
a) Development of Long Range Plans of the MIS
Many organizations have purchased computers for data processing and for meeting the
statutory requirements of filing the returns and reports to the Government. Computers are used
mainly for computing and accounting the business transactions and have not been considered as
a tool for information processing. The organizations have invested on computers and expanded
its use by adding more or bigger computers to take care of the numerous transactions in the
business. In this approach, the information processing function of the computers in the
organization never got its due regard as an important asset to the organization. In fact, this
function is misinterpreted as data processing for expeditious generation of reports and returns,
and not as information processing for management actions and decisions. However, the scene
has been changing since late eighties when the computers became more versatile, in the
function of Storage, Communications, Intelligence and Language. The computer technology is
so advanced that the barriers of storage, distance understanding of language and speed are
broken.
The computers have become user-friendly. They can communicate to any distance and hare
data, information and physical resources of other computers. Computers can now be used as a
tool for information processing and communication. It can be used for storing large database or
knowledgebase. It can be used for knowing the current status of any aspect of the business due
to its online real time processing capability. With the advancement of computer technology
more popularly known as information technology, it is now possible to recognize information
as a valuable resource like money and capacity. It is necessary to link its acquisition, storage,
use, and disposal as per the business needs for meeting the business objectives. Such a broad
based activity can be executed only when it is conceived as a system. This system should deal
with management information and not with data processing alone. It should provide support for
management planning, decision making and action. It should support the needs of the lower
management as well as that of the top management. It should satisfy the needs of different
people in the organization at different levels having varying managerial capabilities. It should
provide support to the changing needs of business management. In short, we need a
Management Information System flexible enough to deal with the changing information needs
of the organization. It should be conceived as an open system continuously interacting with the
business environment with a built-in mechanism to provide the desired information as per the
new requirements of the management. The designing of such an open system is a complex task.
It can be achieved only if the MIS is planned, keeping in view, the plan of the business
management of the organization. The plan of MIS is consistent to the business plan of the
organization. The information needs for the implementation of the business plan should find
place in the MIS. To ensure such an alignment possibility, it is necessary that the business plan
– strategic or otherwise, states the information needs. The information needs are then traced to
the source data and the systems in the organization which generate such a data. The plan of
 development of the MIS is linked with the steps of the implementation in a business
development plan. The system of information generation is so planned that strategic
information is provided for the strategic planning, control information is provided for a short
term planning and execution. The details of information are provided to the operations
management to assess the status of an activity and to find ways to make up, if necessary. Once
the management needs are translated into information needs, it is left to the designer to evolve a
plan of MIS development and implementation.

b) Contents of the MIS Plan

A long range MIS plan provides direction for the development of the systems, and provides a
basis for achieving the specific targets or tasks against a time frame. The plan would have
contents which will be dealt by the designer under a support from the top management.

C) MIS Goals and Objectives

It is necessary to develop the goals and objectives for the MIS which will support the business
goals. The MIS goals and objectives will consider management philosophy, policy constraints,
business risks, internal and external environment of the organization and the business. The
goals and the objectives of the MIS would be so stated that they can be measured. The typical
statements of the goals are as under:
o It should provide online information on the stock, markets and the accounts balances.
o The query processing should not exceed more than three seconds.
o The focus of the system will be on the end user computing and access facilities.
Such statements of the goals and objectives enable the designer to set the direction and design
implementation strategies for the MIS Plan.

Strategy for the Plan Achievement

The designer has to take a number of strategic decisions for the achievement of the MIS goals
and objectives. They are:
a) Development strategy: An online, a batch, a real time technology platform.
b) System development strategy: Any approach to the system development – Operational vs.
Functional; Accounting vs. Analysis; Database vs. Conventional approach; Distributed vs.
Decentralized processing; One Database vs. multiple databases SSAD vs. OOT
c) Resources for system development: In house vs. external, customized development vs. the
use of packages.
d) Manpower composition: Analyst, programmer skills and knowhow.
The Architecture of the MIS
The architecture of the MIS plan provides a system structure and their input, output and
linkages. It also provides a way to handle the systems or subsystems by way of simplification,
coupling and decoupling of subsystems. It spells out in detail the subsystems from the data
entry to processing, analysis to modeling, and storage to printing.
The System Development Schedule
A schedule is made for the development of the system. While preparing the schedule due
consideration is given to the importance of the system in the overall information requirement.
Due regard is also given to logical system development. For example, it is necessary to develop
the accounting system first and then the analysis. Further, unless the systems are fully
developed their integration is not possible. This development schedule is to be weighed against
the time scale for achieving certain information requirement linked to a business plan. If these
 are not fully met, it is necessary to revise the time schedule and also the development schedule,
whenever necessary.
Hardware and Software Plan
Giving due regard to the technical and operational feasibility, the economics of investment is
worked out. Then the plan of procurement is made after selecting the hardware and software.
One can take the phased approach of investment starting from the lower configuration of
hardware going over to higher as development takes place. The process is to match the
technical decisions with the financial decisions. The system development schedule is linked
with the information requirements which in turn, are linked with the goals and objectives of the
business. The selection of the architecture, the approach to the information system development
and the choice of hardware and software are the strategic decisions in the design and
development of the MIS in the organization. The organizations which do not care to take proper
decisions in these areas suffer from overinvestment, underutilization and are not able to meet
the critical information requirements. It is important to note the following points:
1. The organization’s strategic plan should be the basis for the MIS strategic plan.
2. The information system development schedule should match with the implementation
schedule of the business plan.
3. The choice of information technology is a strategic business decision and not a financial
decision.

Development of Information Systems

a) Development and Implementation of the MIS
Once the plan of MIS is made, the development of the MIS calls for determining the strategy of
development is discussed earlier, the plan consists of various systems and subsystems. The
development strategy determines where to begin and in what sequence the development can
take place with the sole objective of assuring the information support. The choice of the system
or the subsystem depends on its position in the total MIS plan, the size of the system, the user's
understanding of the systems and the complexity and its interface with other systems. The
designer first develops systems independently and starts integrating them with other systems,
enlarging the system scope and meeting the varying information needs. Determining the
position of the system in the MIS is easy. The real problem is the degree of structure, and
formalization in the system and procedures which determine the timing and duration of
development of the system. Higher the degree of structured and formalization, greater is the
stabilization of the rules, the procedures, decision-making and the understanding of the overall
business activity. Here, it is observed that the user's and the designer's interaction is smooth,
and their needs are clearly understood and respected mutually. The development becomes a
method of approach with certainty in input process and outputs.
b) Prototype Approach
When the system is complex, the development strategy is Prototyping of the System.
Prototyping is a process of progressively ascertaining the information needs, developing
methodology, trying it out on a smaller scale with respect to the data and the complexity,
ensuring that it satisfies the needs of the users, and assess the problems of development and
implementation.
This process, therefore, identifies the problem areas, inadequacies in the prototype visa is
fulfillment of the information needs. The designer then takes steps to remove the inadequacies.
This may call upon changing the prototype of the system, questioning the information needs,
streamlining the operational systems and procedures and move user interaction.
In the prototyping approach, the designer's task becomes difficult, when there are multiple users
of the same system and the inputs they use are used by some other users as well. For example, a
lot of input data comes from the purchase department, which is used in accounts and inventory
management.
The attitudes of various users and their role as the originators of the data need to be developed
with a high degree of positivism. It requires, of all personnel, to appreciate that the information
is a corporate resource, and all have to contribute as per the designated role by the designer to
fulfill the corporate information needs. When it comes to information the functional, the
departmental, the personal boundaries do not exist. This call upon each individual to comply
with the design needs and provide without fail the necessary data inputs whenever required as
per the specification discussed and finalized by the designer.
Bringing the multiple users on the same platform and changing their attitudes toward
information, as a corporate resource, is the managerial task of the system designer. The
qualification, experience, knowledge, of the state of art, and an understanding of the corporate
business, helps considerably, in overcoming the problem of changing the attitudes of the
multiple users and the originators of the data.
c) Life Cycle Approach
There are many systems or subsystems in the MIS which have a life cycle, that is, they have
birth and death. Their emergence may be sudden or may be a part of the business need, and
they are very much structured and rule based. They have 100% clarity of inputs and their
sources, a definite set of outputs in terms of the contents and formats. These details more or less
remain static from the day the system emerges and remains in that static mode for a long time.
Minor modifications or changes do occur but they are not significant in terms of handling either
by the designer or the user of the system. Such systems, therefore, have a life and they can be
developed in a systematic manner, and can be reviewed after a year or two, for significant
modification, if any.

Examples of such systems are pay roll, share accounting, basic financial accounting, finished
goods accounting and dispatching, order processing, and so on. These systems have a fairly
long duration of survival and they contribute in a big way as sources of data to the Corporate
MIS. Therefore, their role is important and needs to be designed from the viewpoint as an
interface to the Corporate MIS.
d) Implementation of the Management Information System
The implementation of the system is a management process. It brings about organizational
change; It affects people and changes their work style. The process evokes a behavior response
which could be either favorable or unfavorable depending upon the strategy of system
implementation.
In the process of implementation, the system designer acts as a change agent or a catalyst. For a
successful implementation he has to handle the human factors carefully. The user of the system
has a certain fear complex when a certain cultural work change is occurring. The first and the
foremost fear are about the security to the person if the changeover from the old to new is not a
smooth one. Care has to be taken to assure the user that such fears are baseless and the
responsibility, therefore, rests with the designer. The second fear is about the role played by the
person in the organization and how the change affects him. On many occasions, the new role
may reduce his importance in the organization, the work design may make the new job
impersonal, and a fear complex may get reinforced that the career prospects may be affected.
There are certain guidelines for the systems designer for successful implementation of the
system. The system designer should not question beyond a limit the information need of the
user.
1. Not to forget that his role is to offer a service and not to demand terms.
2. Remember that the system design is for the use of the user and it is not the designer's
prerogative to dictate the design features. In short, the designer should respect the demands of
the user.
3. Not to mix up technical needs with the information needs. He should try to develop suitable
design with appropriate technology to meet the information needs. The designer should not
recommend modifications of the needs, unless technically infeasible.
4. Impress upon the user the global nature of the system design which is required to meet the
current and prospective information need.
5. Not to challenge the application of the information in decision-making. It is the sole right of
the user to use the information the way he thinks proper.
6. Impress upon the user that the quality of information depends on the quality of input.
7. Impress upon the user that you are one of the users in the organization and that the
information is a corporate resource and he is expected to contribute to the development of the
MIS.
8. Ensure that the user makes commitment to all the requirements of the system design
specifications. Ensure that he appreciates that his commitments contribute largely to the quality
of the information and successful implementation of the system.
9. Ensure that the overall system effort has the management's acceptance.
10. Enlist the user's participation from time to time, so that he is emotionally involved in the
process of development.
11. Realize that through serving the user, he is his best guide on the complex path of
development.
12. Not to expect perfect understanding and knowledge from the user as he may be the user of a
non-computerized system. Hence, the designer should be prepared to change the system
specifications or even the design during the course of development.
13. Impress upon the user that the change, which is easily possible in manual system, is not as
easy in the computer system as it calls for changes in the programs at cost.
14. Impress upon the user that perfect information is nonexistent; His role therefore still has an
importance in the organization.
15. Ensure that the other organization problems are resolved first before the MIS is taken for
development.
16. Conduct periodical user meetings on systems where you get the opportunity to know the
ongoing difficulties of the users.
17. Train the user in computer appreciation and systems analysis as his perception of the
computerized information system will fall short of the designer's expectation. Implementation
of the MIS in an organization is a process where organizational transformation takes place. This
change can occur in a number of ways. The Lewin's model suggests three steps in this process.
The first step is unfreezing the organization to make the people more receptive and interested
in the change. The second step is choosing a course of action where the process begins and
reaches the desired level of stability, and the third step is Refreezing, where the change is
consolidated and equilibrium is reinforced. Many a times, this process is implemented through
an external change agent, such as a consultant playing the role of a catalyst.
The significant problem in this task is the resistance to change. The resistance can occur due to
three reasons, viz., the factors internal to the users of information, the factors inherent in the
design of the system and the factors arising out of the interaction between the system and its
users. The problem of resistance can be handled through education, persuasion, and
participation. This can be achieved by improving the human actors, and providing incentives to
the users, and eliminating the organizational problems before implementing the system.

Systems Analysis

Introduction to Systems Analysis

System analysis is the survey and planning of the project, the study and analysis of the existing
business and information system and the definition of business requirements. System analysis
involves two phases: study phase and definition phase.

Survey phase The purpose of the survey phase is to determine the worthiness of the project
and to create a plan to complete those projects, deemed worthy. To accomplish the survey phase
objectives, the system analyst will work with the system owner, system users, IS manager and
IS staff to:
o Survey problems, opportunities and solutions
o Negotiate project scope
o Plan the project
o Present the project
SDLC
System development cycle stages are sometimes known as system study. System concepts
which are important in developing business information systems expedite problem solving and
improve the quality of decision-making.
The system analyst has to do a lot in this connection. They are confronted with the challenging
task of creating new systems and planning major changes in the organization. The system
analyst gives a system development project, meaning and direction. The typical breakdown of
an information systems life cycle includes a feasibility study, requirements, collection and
analysis, design, prototyping, implementation, validation, testing and operation. It may be
represented in the form of a block diagram as shown below:

a)Feasibility study It is concerned with determining the cost effectiveness of various

alternatives in the designs of the information system and the priorities among the various
system components.

b) Requirements, collection and analysis It is concerned with understanding the mission of

the information systems, that is, the application areas of the system within the enterprise and
the problems that the system should solve.
c) Design It is concerned with the specification of the information systems structure. There are
two types of design: database design and application design. The database design is the design
of the database design and the application design is the design of the application programs.
d) Prototyping A prototype is a simplified implementation that is produced in order to verify
in practice that the previous phases of the design were well conducted.
e) Implementation It is concerned with the programming of the final operational version of the
information system. Implementation alternatives are carefully verifies and compared.
f) Validation and testing it is the process of assuring that each phase of the development
process is of acceptable quality and is an accurate transformation from the previous phase.
 Roles of Systems Analyst
System analysts are the facilitators of the study of the problem and needs of a business to
determine how the business systems and information technology can best solve the problem
and accomplish improvements for the business. The system analyst is responsible for
examining the total flow of data throughout the organization.
Various aspects of an organization like personnel interactions and procedures for handling
problems of the computer are studied by him. The person involved in the system development
is known as system analyst. His main role is as consultant, supporting and maintenance expert,
he should work with a cross section of people and should have the experience of working with
computers. He is a problem solver and takes problem as a challenge and enjoys meeting
challenges. He knows how to use the right tools, techniques and experience at the right time.

Feasibility of Systems
Feasibility is a measure of how beneficial the development of an information system would be
to an organization. Feasibility analysis is the activity by which the feasibility is measured.
Feasibility study is a preliminary study which investigates the information needs of prospective
users and determines the resource requirements, costs, benefits and feasibility of a proposed
project. The data is first collected for the feasibility study. Later on, the findings of the study
are formalized in a written report that includes preliminary specifications and a development
plan for the proposed system. If the management approves these recommendations of the report
the development process can continue.
Types of feasibility
The goal of feasibility study is to evaluate alternative systems and to propose the most feasible
and desirable system for development. The feasibility of a proposed system can be evaluated in
four major categories:
a) Technical feasibility: It is a measure of a technology’s suitability to the application being
designed or the technology’s ability to work with other technologies. It measures the
practicality of a specified technical solution.
b) Economic feasibility: It is the measure of the cost effectiveness of a project. It is also
known as cost benefit analysis.
c) Operational feasibility: It is a measure of how comfortable the management and users are
with the technology.
d) Schedule feasibility: It is a measure of how reasonable the project schedule is.
DFD
Data flow diagrams represent the logical flow of data within the system. DFD do not explain
how the processes convert the input data into output. They do not explain how the processing
takes place.
DFD uses few symbols like circles and rectangles connected by arrows to represent data flows.
DFD can easily illustrate relationships among data, flows, external entities and stores. DFD can
also be drawn in increasing levels of detail, starting with a summary high level view and
proceeding o more detailed lower level views.
 A number of guidelines should be used in constructing DFD.
· Choose meaningful names for the symbols on the diagram.
· Number the processes consistently. The numbers do not imply the sequence.
· Avoid over complex DFD.
· Make sure the diagrams are balanced

Data Dictionary
The data dictionary is used to create and store definitions of data, location, format for storage
and other characteristics. The data dictionary can be used to retrieve the definition of data that
has already been used in an application. The data dictionary also stores some of the
description of data structures, such as entities, attributes and relationships. It can also have
software to update itself and to produce reports on its contents and to answer some of the
queries.

Systems Design
Introduction to SD
The business application system demands designing of systems suitable to the application in
project. The major steps involved in the design are the following:
Input Design Input design is defined as the input requirement specification as per a format
required. Input design begins long before the data arrives at the device. The analyst will have to
design source documents, input screens and methods and procedures for getting the data into
the computer.
Output Design – The design of the output is based on the requirement of the user –manager,
customer etc. The output formats have to very friendly to the user. Therefore the designer has to
ensure the appropriateness of the output format.
Development – When the design and its methodology are approved, the system is developed
using appropriate business models. The development has to be in accordance to a given
standard. The norms have to be strictly adhered to.
Testing Exhaustive and thorough testing must be conducted to ascertain whether the system
produces the right results. Testing is time consuming: Test data must be carefully prepared,
results reviewed and corrections made in the system. In some instances, parts of the system
may have to be redesigned. Testing an information system can be broken down into three types
of activities: unit testing, system testing and acceptance test. Unit testing or program testing
consists of testing each program separately in the system. The purpose of such testing is to
guarantee that programs are error free, but this goal is realistically impossible. Instead, testing
should be viewed as a means of locating errors in programs, focusing on finding all ways to
make a program fail. Once pinpointed, problems can be corrected. System testing tests the
functioning of the information system as a whole. It tries to determine if discrete modules will
function together as planned and whether discrepancies exist between the way the system
actually works and the way it was conceived. Among the areas examined are performance time,
capacity for file storage and handling peak loads, recovery and restart capabilities and manual
procedures. Acceptance testing provides the final certification that the system is ready to be
used in a production setting. Systems tests are evaluated by users and reviewed by
management. When all parties are satisfied that the new system meets their standards, the
system is formally accepted for installation.

Implementation and Maintenance

Conversion is the process of changing from the old system to the new system. Four main
conversion strategies can be employed. They are the parallel strategy, the direct cutover
strategy, the pilot strategy and the phased strategy.
In a parallel strategy both the old system and its potential replacement are run together for a
time until everyone is assure that the new one functions correctly. This is the safest conversion
approach because, in the event of errors or processing disruptions, the old system can still be
used as a backup. But, this approach is very expensive, and additional staff or resources may be
required to run the extra system. The direct cutover strategy replaces the old system entirely
with the new system on an appointed day. At first glance, this strategy seems less costly than
the parallel conversion strategy. But, it is a very risky approach that can potentially be more
costly than parallel activities if serious problems with the new system are found. There is no
other system to fall back on. Dislocations, disruptions and the cost of corrections are enormous.
The pilot study strategy introduces the new system to only a limited area of the organization,
such as a single department or operating unit. When this version is complete and working
smoothly, it is installed throughout the rest of the organization, either simultaneously or in
stages.
The phased approach strategy introduces the new system in stages, either by functions or by
organizational units. If, for example, the system is introduced by functions, a new payroll
system might begin with hourly workers who are paid weekly, followed six months later by
adding salaried employees( who are paid monthly) to the system. If the system is introduced by
organizational units, corporate headquarters might be converted first, followed by outlying
operating units four months later.
Moving from an old system to a new system requires that end users be trained to use the new
system. Detailed documentation showing how the system works from both a technical and end-
user standpoint is finalized during conversion time for use in training and everyday operations.
Lack of proper training and documentation contributes to system failure, so this portion of the
systems development process is very important.
Production and maintenance
After the new system is installed and conversion is complete, the system is said to be in
production. During this stage the system will be reviewed by both users and technical
specialists to determine how well it has met its original objectives and to decide whether any
revisions or modifications are in order. In some instances, a formal post implementation audit
document will be prepared. After the system has been fine-tuned, it will need to be maintained
while it is in production to correct errors, meet requirements or improve processing efficiency.
Once a system is fully implemented and is being used in business operations, the maintenance
function begins. Systems maintenance is the monitoring, or necessary improvements. For
example, the implementation of a new system usually results in the phenomenon known as the
learning curve. Personnel who operate and use the system will make mistake simply because
they are familiar with it. Though such errors usually diminish as experience is gained with a
new system, they do point out areas where a system may be improved.
Maintenance is also necessary for other failures and problems that arise during the operation of
a system. End-users and information systems personnel then perform a troubleshooting
function to determine the causes of and solutions to such problems.
Maintenance also includes making modifications to an established system due to changes in the
business organizations, and new e-business and ecommerce initiatives may require major
changes to current business systems.