UNIT 2

Course Content:

Management Information systems (MIS), classification of MIS, need of MIS,

Transaction processing system (TPS), office automation system (OAS), Executive
support system (ESS).

Management Information systems (MIS)

Information is the basis for every decision taken in an organization. The efficiency of
management depends upon the availability of regular and relevant information. Thus it is
essential that an effective and efficient reporting system be developed as part of accounting
system. The main object of management information is to obtain the required about the
operating results of an organization regularly in order to use them for future planning and
control. The old techniques like intuition, rule of thumb, personal whim and prestige, etc.
are now considered useless in the process of decision taking. Modern management is
constantly on look out for such quantitative and such information, which can help in
analyzing the proposed alternative actions and choosing one as its decision. Thus, modern
management functions are information-oriented more popularly known as ―”management
by information”. And the system through which information is communicated to the
management is known as ―”management information system (MIS)”. The management
needs full information before taking any decision .good decisions can minimize costs and
optimize results. Management information system can be helpful to the management in
undertaking management decisions smoothly and effectively.

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Management information system can be analyzed thus:

Management: management covers the planning, control, and administration of the

operations of a concern. The top management handles planning; the middle management
concentrates on controlling; and the lower management is concerned with actual
administration.

Information: information, in MIS, means the processed data that helps the management in
planning, controlling and operations. Data means all the facts arising out of the operations
of the concern. Data is processed i.e. recorded, summarized, compared and finally
presented to the management in the form of MIS report.

System: data is processed into information with the help of a system. a system is made up
of inputs, processing, output and feedback or control. Thus MIS means a system for
processing data in order to give proper information to the management for performing its
functions.

Importance of Management Information System

Management information system is an integrated set of component or entities that interact
to achieve a particulars function, objective or goal. Therefore it is a computer based system
that provides information for decisions making on planning, organizing and controlling the
operation of the sub-system of the firm and provides a synergistic organization in the
process. The component of an information system includes. a hardware which is used for
input/output process and storage of data, software used to process data and also to
instruct the hand-ware component, data bases which is the location in the system where all
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the organization data will be automated and procedures which is a set of documents that
explain the structure of that management information system.

There are various driving factors of management information system for

example:-

I. Technological revolutions in all sectors make modern managers to need to have

access to large amount of selective information for the complex tasks and decisions.

II. There are huge amount of information available to today’s manager and this had
therefore meant that managers are increasingly relying on management information
system to access the exploding information.

III. Management information services helps manager to access relevant, accurate, up-
to-date information which is the more sure way of making accurate decisions. It also
helps in automation and incorporation of research and management science
techniques into the overall management information system for example
probability theory.

IV. The management information services are capable of taking advantage of the
computational ability of the company like processing, storage capacity among
others.

V. Based on this relevancy, management information system should be installed and

upgraded in various organizations since today’s managers need them to access
information for managerial decision making and also management functions

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Importance of MIS in Organizations

Internet An Organization’s
MIS

Financial
MIS
Business
transactions

Accounting
Transaction Databases MIS Exception reports
processing of
Demand reports
systems valid
transactions Key-indicator reports
Marketing
MIS Scheduled reports

Business
transactions
Databases Human
of
Resources Etc.
external
data MIS
Extranet
Etc.

Functional aspects

a. The organization that uses MIS is able to record, process, route & tabulate all
important business transactions. As & when need arises the organization is able to
incorporate the needed changes & improvements in the area of concern.

b. MIS facilitates informed DECISION MAKING. It usually represents a number of

options from which one can choose the best.

c. The top management ANALYSES whether its resources are being utilized optimally.

d. A TWO WAY COMMUNICATION FLOW is greatly enhanced by the MIS. The

management freely tells the job responsibilities to its employees. The employees in
return discuss their doubts & grievances.

e. MIS supports the planning & controlling function of managers in the organization.
Managers use past/historical data as well as the current data to analyze the
performance & hence apply controlling measures.

f. MIS encourages DECENTRALISATION in the organization. Decentralizations

possible when there's a system to measure operations at the lower levels.

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 g. It brings COORDINATION. It facilitates integration of specialized activities by
keeping each department aware of the problems & requirements of other
departments.

MIS provides the following advantages.

i. It Facilitates planning: MIS improves the quality of plants by providing relevant

information for sound decision – making. Due to increase in the size and complexity
of organizations, managers have lost personal contact with the scene of operations.

ii. In Minimizes information overload: MIS change the larger amount of data in to
summarize form and there by avoids the confusion which may arise when managers
are flooded with detailed facts.

iii. MIS Encourages Decentralization: Decentralization of authority is possibly when

there is a system for monitoring operations at lower levels. MIS is successfully used
for measuring performance and making necessary change in the organizational
plans and procedures.

iv. It brings Co ordination: MIS facilities integration of specialized activities by

keeping each department aware of the problem and requirements of other
departments. It connects all decision centers in the organization.

v. It makes control easier: MIS serves as a link between managerial planning and
control. It improves the ability of management to evaluate and improve
performance. The used computers has increased the data processing and storage
capabilities and reduced the cost.

vi. Transaction processing :systems offer enterprises the means to rapidly process
transactions to ensure the smooth flow of data and the progression of processes
throughout the enterprise

vii. Rapid Processing: The rapid processing of transactions is vital to the success of any
enterprise – now more than ever, in the face of advancing technology and customer
demand for immediate action.

viii. Reliability: Similarly, customers will not tolerate mistakes. TPS systems must be
designed to ensure that not only do transactions never slip past the net, but that the
systems themselves remain operational permanently.

ix. MIS assembles, process, stores, Retrieves, evaluates and disseminates the
information.

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Classification of MIS

Information systems are made out of components that can be assembled in many different
configurations, resulting in a variety of information systems and applications, much as
construction materials can be assembled to build different homes types. The size and cost
of a home depend on the purpose of the building, the availability of money, and constraints
such as ecological and environmental legal requirements. Just as there are many different
types of houses, so there are many different types of information systems. It is useful to
classify information systems into groups that share similar characteristics. Such a
classification may help in identifying systems, analyzing them, planning new systems,
planning integration of systems, and making decisions such as the possible outsourcing of
systems. This classification can be done in several alternative ways. Information systems
are classified by:

 Classification by organizational level

 Classification by mode of data processing system
 Classification by System Objectives
 Classification by type of Support provided

Classification by organizational level

Organizations are made up of components such as divisions, departments, and work units,
organized in hierarchical levels. For example, most organizations have functional
departments, such as production and accounting, which report to plant management,
which report to a division head. The divisions report to the corporate headquarters.
Although some organizations have restructured themselves in innovative ways, such as
those based on cross-functional teams, today the vast majority of organizations still have a
traditional hierarchical structure. Thus, we can find information systems built for
headquarters, for divisions, for the functional departments, for operating units, and even
for individual employees. Such systems can stand alone, but usually they are
interconnected.
Typical information systems that follow the organizational structure are functional
(departmental), enterprise, and inter-organizational. These systems are organized in a
hierarchy in which each higher-level system consists of several (even many) systems from
the level below it. At a higher level, the enterprise system supports the entire company, and
inter-organizational systems connect different companies.

i. Functional Information System: Functional organizations are hierarchical

structures and center on a strong concept of supervisors and subordinates. The
controlling authority, often called top management, coordinates with each
management level and functional department to keep the organization running
smoothly. A functional organization analyzes the strengths and weaknesses of
each member, groups them into categories and assigns them to tasks that best
utilize their skills. Jobs that perform a similar function are grouped in
functional areas. Each functional area contains employees with varied skills
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 that are further grouped based on specialization and put in separate units or
departments. Information systems which served these functional departments
are called functional information systems.

ii. Enterprise Information System: While a departmental information system is

usually related to a functional area, other information systems serve several
departments or the entire enterprise. These information systems together with
the departmental applications comprise the enterprise information system
(EIS). One of the most popular enterprise applications is enterprise resources
planning (ERP), which enables companies to plan and manage the resources of
an entire enterprise. ERP systems present a relatively new model of enterprise
computing now days.

iii. Inter-Organisational Information System: Some information systems

connect two or more organizations. They are referred to as inter-
organizational information systems (IOS's). IOS's support many inter-
organizational operations, of which supply chain management is the best
known. An organization’s supply chain describes the flow of materials,
information, money, and services from raw material suppliers through
factories and warehouses to the end customers. Note that the supply chain
includes both physical flows and information flows. Information flows and
digitizable products (e.g., music and software) go through the Internet,
whereas physical products are shipped. For example, when you order a
computer from www.dell.com, your information goes to Dell via the Internet.
When your transaction is complete (i.e., your credit card is approved and your
order is processed), Dell ships your computer to you. Figure below represents
information flows and digitizable products (soft products) with dotted lines
and physical products (hard products) as solid lines.

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 Classification by Mode of Data Processing

i. Batch Processing Systems: The transactions are collected as they occur, but
processed periodically, say, once a day or week.

i. On-line Batch Systems: The transaction information is captured by on-line

data-entry devices and logged on the system, but it is processed periodically
as in batch processing systems.

ii. On-line Real-time Systems: The transaction data capture as well as their
processing in order to update records (and generate reports) is carried out in
real-time as the transaction is taking place.

Classification by System Objectives

i. Transaction Processing Systems (TPS): Their objective is to process transactions in

order to update records and generate reports, i.e., to perform score-keeping functions.

ii. Process Control System (PCS): These systems are designed to make routine decision
that control operational processes.

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iii. Decision Support Systems (DSS): Their objective is to support the managerial
decisions. Usually, these systems are based on a model of the decision-making domain,
and utilize techniques from management science, finance or other functional areas of
business in order to build such models. These systems are also used often for attention-
directing purposes, i.e., for directing the attention of managers to a problematic aspect
of operations.

iv. Expert Systems (ES): These systems incorporate expertise in order to aid managers in
diagnosing problems or in problem solving.

v. Executive Information System (EIS): These are MIS tailored to the strategic
information needs of the top managers.

vi. Business Information Systems (BIS): As a future managerial end user, it is very
important to realize that information systems directly support both operations and
management activities in business functions of accounting, finance, human resource
management, marketing, and operations management. Such business information
systems are needed by all business functions.

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Classification based on type of support provided

Another way to classify information systems is according to the type of support they
provide, regardless of the functional area. For example, an information system can support
office workers in almost any functional area. Likewise, managers working from various
geographical locations can be supported by a computerized decision-making system.
Clerical workers, who support managers at all levels of the organization, include
bookkeepers, secretaries, electronic file clerks, and insurance claim processors. Lower-
level managers handle the day-to-day operations of the organization, making routine
decisions such as assigning tasks to employees and placing purchase orders. Middle
managers make tactical decisions, which deal with activities such as short-term planning,
organizing, and control.

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 Knowledge workers are professional employees such as financial and marketing
analysts, engineers, lawyers, and accountants. All knowledge workers are experts in a
particular subject area. They create information and knowledge, which they integrate into
the business. Knowledge workers act as advisors to middle managers and executives.
Finally, executives make decisions that deal with situations that can significantly
change the manner in which business is done. Examples of executive decisions are
introducing a new product line, acquiring other businesses, and relocating operations to a
foreign country.
Office automation systems (OAS's) typically support the clerical staff, lower and
middle managers, and knowledge workers. These employees use OAS to develop
documents (word processing and desktop publishing software), schedule resources
(electronic calendars), and communicate (e-mail, voice mail, videoconferencing, and
groupware).

Transaction processing system (TPS)

A transaction processing system (TPS) supports the processing of a firm's business

transactions. Transaction processing system keeps on organization running smoothly by
automating the processing of the large amount of paper work that must be handled daily.
These systems include the accurate recording of transactions as well as the control
procedures used in issuing such documents as pay checks, invoices, customer statements,
payment reminders, tuition bills, and student schedules unlike other components of
management information system, the transaction processing system of an organization
extending out of the organization linking together the entire financial system, factory,
customers, and suppliers. Sometimes, the term data processing system is used for TPS. The
primary purpose of these systems is to effectively process the data that arise from
transactions.
The transaction processing system of a departmental store can record customer purchases,
prepare billing and booking of order from suppliers and inter-relate these tasks into an
overall accounting system.

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Batch processing

Batch processing is a form of transaction processing. Batch processing involves processing

several transactions at the same time, and the results of each transaction are not
immediately available when the transaction is being entered; there is a time delay.
Transactions are accumulated for a certain period (say for day) where updates are made
especially after work. Online transaction processing is the form of transaction processing
that processes data as it becomes available.
Example
• Cheque clearance: written order asking bank to pay money to a person
• Bill generation: an invoice for goods/services supplied to a customer.
• Credit card sales transaction: takes impression of customer’s card

Real-time and batch processing

There are a number of differences between real-time and batch processing. These are
outlined below:
 Each transaction in real-time processing is unique. It is not part of a group of
transactions, even though those transactions are processed in the same manner.
Transactions in real-time processing are stand-alone both in the entry to the system
and also in the handling of output.

 Real-time processing requires the master file to be available more often for updating
and reference than batch processing. The database is not accessible all of the time
for batch processing.

 Real-time processing has fewer errors than batch processing, as transaction data is
validated and entered immediately. With batch processing, the data is organized and
stored before the master file is updated. Errors can occur during these steps.

 Infrequent errors may occur in real-time processing; however, they are often
tolerated. It is not practical to shut down the system for infrequent errors. More
computer operators are required in real-time processing, as the operations are not
centralized. It is more difficult to maintain a real-time processing system than a
batch processing system.

Example
• Reservation systems: set aside service/product for future use
• Motels
• Point-of-sale (POS) terminals: sells goods/services
• Library loan systems: keeps track of items borrowed from library.

Features

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  Rapid response - Fast performance with a rapid response time is critical.
Businesses cannot afford to have customers waiting for a TPS to respond, the
turnaround time from the input of the transaction to the production for the output
must be a few seconds or less. Reliability- Many organizations rely heavily on their
TPS; a breakdown will disrupt operations or even stop the business. For a TPS to be
effective its failure rate must be very low. If a TPS does fail, then quick and accurate
recovery must be possible. This makes well–designed backup and recovery
procedures essential.

 Inflexibility- A TPS wants every transaction to be processed in the same way

regardless of the user, the customer or the time for day. If a TPS were flexible, there
would be too many opportunities for non-standard operations, for example, a
commercial airline needs to consistently accept airline reservations from a range of
travel agents, accepting different transactions data from different travel agents
would be a problem.

 Controlled processing- The processing in a TPS must support an organization's

operations. For example if an organization allocates roles and responsibilities to
particular employees, then the TPS should enforce and maintain this requirement.
An example of this is an ATM transaction

Office automation system (OAS)

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The term office automation refers to all tools and methods that are applied to office
activities which make it possible to process written, visual, and sound data in a computer-
aided manner. Office automation is intended to provide elements which make it possible to
simplify, improve, and automate the organisation of the activities of a company or a group
of people (management of administrative data, synchronization of meetings, etc.).
Considering that company organizations require increased communication, today, office
automation is no longer limited to simply capturing handwritten notes. In particular, it also
includes the following activities:

 exchange of information
 management of administrative documents
 handling of numerical data
 meeting planning and management of work schedules

Types of functions integrated by office automation systems include

(1) Electronic publishing;

(2) Electronic communication;
(3) Electronic collaboration;
(4) Image processing; and
(5) Office management.

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At the heart of these systems is often a local area network (LAN). The LAN allows users to
transmit data, voice, mail, and images across the network to any destination, whether that
destination is in the local office on the LAN, or in another country or continent, through a
connecting network. An OAS makes office work more efficient and increases productivity.

 Electronic Publishing- Electronic publishing systems include word processing and

desktop publishing. Word processing software, (e.g., Microsoft Word, Corel Word-
Perfect) allows users to create, edit, revise, store, and print documents such as
letters, memos, reports, and manuscripts. Desktop publishing software (e.g., Adobe
Pagemaker, Corel VENTURA, Microsoft Publisher) enables users to integrate text,
images, photographs, and graphics to produce high-quality printable output.
Desktop publishing software is used on a microcomputer with a mouse, scanner,
and printer to create professional-looking publications. These may be newsletters,
brochures, magazines, or books.

 Electronic Communication- Electronic communication systems include electronic

mail (e-mail), voice mail, facsimile (fax), and desktop videoconferencing.

 Electronic Mail- E-mail is software that allows users, via their computer keyboards,
to create, send, and receive messages and files to or from anywhere in the world.
Most email systems let the user do other sophisticated tasks such as filter, prioritize,
or file messages; forward copies of messages to other users; create and save drafts
of messages; send "carbon copies"; and request automatic confirmation of the
delivery of a message. E-mail is very popular because it is easy to use, offers fast
delivery, and is inexpensive. Examples of e-mail software are Eudora, Lotus Notes,
and Microsoft Outlook.

 Voice Mail- Voice mail is a sophisticated telephone answering machine. It digitizes

incoming voice messages and stores them on disk. When the recipient is ready to
listen, the message is converted from its digitized version back to audio, or sound.
Recipients may save messages for future use, delete them, or forward them to other
people.

 Facsimile- A facsimile or facsimile transmission machine (FAX) scans a document

containing both text and graphics and sends it as electronic signals over ordinary
telephone lines to a receiving fax machine.

 Desktop Videoconferencing - Desktop videoconferencing is one of the fastest

growing forms of videoconferencing. ﾀ Desktop videoconferencing requires a
network and a desktop computer with special application software.

 Electronic Collaboration- Electronic collaboration is made possible through

electronic meeting and collaborative work systems and teleconferencing. Electronic
meeting and collaborative work systems allow teams of coworkers to use networks

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 of microcomputers to share information, update schedules and plans, and cooperate
on projects regardless of geographic distance. Special software called groupware is
needed to allow two or more people to edit or otherwise work on the same files
simultaneously.

 Teleconferencing is also known as videoconferencing.

As was mentioned in the discussion of desktop videoconferencing earlier, this

technology allows people in multiple locations to interact and work collaboratively
using real-time sound and images. Full teleconferencing, as compared to the desktop
version, requires special-purpose meeting rooms with cameras, video display
monitors, and audio microphones and speakers.

 Telecommuting and Collaborative Systems.

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 Telecommuters perform some or all of their work at home instead of traveling to an
office each day, usually with the aid of office automation systems, including those
that allow collaborative work or meetings. A microcomputer, a modem, software
that allows the sending and receiving of work, and an ordinary telephone line are
the tools that make this possible.

 High-tech meeting rooms help companies make more effective presentations.

At some conference halls, like this one at the Chinzan-so Four Seasons Hotel in
Toyko, small video screens are built into the table tops.

 Telecommuting is gaining in popularity in part due to the continuing increase in

population, which creates traffic congestion, promotes high energy consumption,
and causes more air pollution. Telecommuting can help reduce these problems.
Telecommuting can also take advantage of the skills of homebound people with
physical limitations.

 Studies have found that telecommuting programs can boost employee morale and
productivity among those who work from home. It is necessary to maintain a
collaborative work environment, however, through the use of technology and
general employee management practices, so that neither on-site employees nor
telecommuters find their productivity is compromised by such arrangements. The
technologies used in electronic communication and teleconferencing can be useful
in maintaining a successful telecommuting program.

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  Image Processing- Image processing systems include electronic document
management, presentation graphics, and multimedia systems. Imaging systems
convert text, drawings, and photographs into digital form that can be stored in a
computer system. This digital form can be manipulated, stored, printed, or sent via a
modem to another computer.

 Imaging systems may use scanners, digital cameras, video capture cards, or
advanced graphic computers. Companies use imaging systems for a variety of
documents such as insurance forms, medical records, dental records, and mortgage
applications.

 Presentation graphics software uses graphics and data from other software tools
to create and display presentations. The graphics include charts, bullet lists, text,
sound, photos, animation, and video clips. Examples of such software are Microsoft
Power Point, Lotus Freelance Graphics, and SPC Harvard Graphics.

 Multimedia systems are technologies that integrate two or more types of media
such as text, graphic, sound, voice, full-motion video, or animation into a computer-
based application. Multimedia is used for electronic books and newspapers, video
conferencing, imaging, presentations, and web sites.

 Office Management- Office management systems include electronic office

accessories, electronic scheduling, and task management. These systems provide an
electronic means of organizing people, projects, and data. Business dates,
appointments, notes, and client contact information can be created, edited, stored,
and retrieved. Additionally, automatic reminders about crucial dates and
appointments can be programmed. Projects and tasks can be allocated, subdivided,
and planned. All of these actions can either be done individually or for an entire
group. Computerized systems that automate these office functions can dramatically
increase productivity and improve communication within an organization.

Executive support system (ESS)

Executive Support System (ESS) is a reporting tool (software) that allows you to turn your
organization's data into useful summarized reports. These reports are generally used by
executive level managers for quick access to reports coming from all company levels and
departments such as billing, cost accounting, staffing, scheduling, and more. In addition to
providing quick access to organized data from departments, some Executive Support
System tools also provide analysis tools that predict a series of performance outcomes over
time using the input data. This type of ESS is useful to executives as it provides possible
outcomes and quick reference to statistics and numbers needed for decision-making.

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The exact reporting tools and outcome of an Executive Support System completely depends
on the ESS developer and it's intended industry use. For example, Cambridge Systematics
has ESS to support the investment planning process for the Ministry of Transportation. The
features and functions of this Executive Support System are entirely different from the
Executive Support System developed by Meditech, which is useful to health care
organizations.

Several companies offer pre-designed Executive Support System packages (usually suited
to one particular industry), while others offer packages which can be customized your
organization's needs.

Types of information system

For most businesses, there are a variety of requirements for information. Senior managers
need information to help with their business planning. Middle management need more
detailed information to help them monitor and control business activities. Employees with
operational roles need information to help them carry out their duties. As a result,
businesses tend to have several "information systems" operating at the same time. This
revision note highlights the main categories of information system and provides some
examples to help you distinguish between them.
The main kinds of information systems in business are described briefly below:

 Executive Support Systems: An Executive Support System ("ESS") is designed to

help senior management make strategic decisions. It gathers, analyses and
summarises the key internal and external information used in the business. A good
way to think about an ESS is to imagine the senior management team in an aircraft
cockpit - with the instrument panel showing them the status of all the key business
activities. ESS typically involve lots of data analysis and modelling tools such as
"what-if" analysis to help strategic decision-making.

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 ESS

MIS DSS

KMS
TPS
OAS

 Management Information Systems : A management information system ("MIS") is

mainly concerned with internal sources of information. MIS usually take data from
the transaction processing systems (see below) and summarise it into a series of
management reports. MIS reports tend to be used by middle management and
operational supervisors.

 Decision-Support Systems: Decision-support systems ("DSS") are specifically

designed to help management make decisions in situations where there is
uncertainty about the possible outcomes of those decisions. DSS comprise tools and
techniques to help gather relevant information and analyse the options and
alternatives. DSS often involves use of complex spreadsheet and databases to create
"what-if" models.

 Knowledge Management Systems: Knowledge Management Systems ("KMS") exist

to help businesses create and share information. These are typically used in a
business where employees create new knowledge and expertise - which can then be
shared by other people in the organisation to create further commercial
opportunities. Good examples include firms of lawyers, accountants and
management consultants. KMS are built around systems which allow efficient
categorisation and distribution of knowledge. For example, the knowledge itself
might be contained in word processing documents, spreadsheets, PowerPoint
presentations. internet pages or whatever. To share the knowledge, a KMS would
use group collaboration systems such as an intranet.

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  Transaction Processing Systems: As the name implies, Transaction Processing
Systems ("TPS") are designed to process routine transactions efficiently and
accurately. A business will have several (sometimes many) TPS; for example:
- Billing systems to send invoices to customers - Systems to calculate the weekly and
monthly payroll and tax payments
- Production and purchasing systems to calculate raw material requirements
- Stock control systems to process all movements into, within and out of the
business.

 Office Automation Systems: Office Automation Systems are systems that try to
improve the productivity of employees who need to process data and information.
Perhaps the best example is the wide range of software systems that exist to
improve the productivity of employees working in an office (e.g. Microsoft Office XP)
or systems that allow employees to work from home or whilst on the move.

 Knowledge based system: Knowledge management systems have become one of

the fastest-growing areas of corporate and government software investment .
Studies have found that a substantial part of a firm's stock market value is related to
its intangible assets, of which knowledge is one important component, along with
brands, reputations, and unique business processes. Knowledge-based projects have
been known to produce extraordinary returns on investment, although knowledge-
based Investments are difficult to measure.

The most important dimensions of knowledge are:

I. Knowledge is a firm asset:

Knowledge is an intangible asset requiring organizational resources and whose value
Increases as it is shared.
II. Knowledge has different forms:
Knowledge includes craft, skills, procedures, and understanding of causality
III. Knowledge has a location:
Knowledge resides with individuals, social groups, is difficult to transfer or extract
IV. Knowledge is situational:
Knowledge may be applicable only in certain contexts or situations

Organizational learning is the process of gaining experience through data collection,

measurement, experiment, and feedback and using these experiences to create new
business processes and management decision making.

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 Example: Knowledge sharing

Transmitter Receiver

Behavior

Technology
and structure

Cognitive skills

Knowledge management is a set of processes to create, store, transfer, and apply

knowledge in the organization. Knowledge management increases the ability of the
organization to learn from its environment and to incorporate knowledge into its business
processes. The knowledge management value chain includes four main steps that add value
to raw data and information as it is transformed into usable knowledge:

1. Knowledge acquisition
2. Knowledge storage
3. Knowledge dissemination

There are three major types of knowledge management systems:

1. Enterprise-wide knowledge management systems

2. Knowledge work systems
3. Intelligent techniques

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Knowledge network systems try to turn tacit, unstructured knowledge into explicit
knowledge that can be shared in a database.

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Artificial intelligence (AI) is the effort to develop computer-based systems (both hardware
and software) that behave as humans, with the ability to learn languages, accomplish
physical tasks, use a perceptual apparatus, and emulate human expertise and decision
making .

Intelligent agents: Are software programs that work in the background without direct
human intervention Carry out specific, repetitive, and predictable tasks. Use a limited built-
in or learned knowledge base to accomplish tasks or make decisions on the user's behalf
are used in agent-based modeling applications used to model or simulate the behavior of
consumers, stock markets, and supply chains.

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INTELLIGENT AGENTS IN P&G’S SUPPLY CHAIN NETWORK
Intelligent agents are helping Procter & Gamble shorten the replenishment cycles for
products such as a box of Tide.

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