Information Systems in Business

Many large businesses such as manufacturers or suppliers, factories or distribution centres have many Information Systems set up and designed to handle the large quantities of processes involved in conducting their function.

Large Information Systems

Some businesses are so large that their processes may require information systems to handle day-to-day business processes. One such example is order processing. Businesses with large order systems or large quantities of products to manufacture may only handle order processing through information systems.

One such information system used in a logistical setting is one that would be used to record inbound goods. Physical product businesses for example need to record incoming raw materials or ordered products to process them and turn them into a product. Without a centralised information system it can be very hard to keep track of stock levels, although maintaining the whereabouts of goods used by the business can be useful but in the real world some of these goods can go missing, be wasted, damaged or arrive having already being damaged. This is why information systems must be able to handle losses and inform stock keepers when the product is becoming depleted and must be re-ordered especially on systems that involve Kanban or Just in Time systems. This is one such example of where information systems must be able to handle all scenarios that an employee will encounter.

Examples of Business Information Systems

Business information systems have different requirements throughout the various departments;

Human Resources must be able to use information systems to 
handle processes such as,

  • Employee Payroll.
  • Employee Performance.
  • Hiring and Job Roles.
  • Staff Records and Employee Contracts.
  • Holiday Management and Illness.
  • Training Programs.
  • Attendance and Absenteeism.
  • Staff Disciplinary Records.

Senior Management may not always use information systems as their roles may be too strategic or sporadic to construct an information system, however they may have daily or even business cyclic tasks such as,

  • Monitoring performance of the business or business processes.
  • Maintaining customer relationships through relationship management software or CRM.
  • Assess generalised performance of a store or business through warehouse management software or employee performance.
  • Make strategic decisions about business processes by using sales data or reporting software.
  • Identify problems with processes or business cycles.
  • Generate Reports for Sales, Product Development or Manufacturers.

General Management may use information systems to,

  • Distribute work to employees.
  • Identify problems with processes or business cycles.
  • Monitor Employee clock-in times.
  • Monitor Employee processes or performance.
  • Record Paying Hours or Overtime.
  • Action directions from higher up.
  • Discipline employees.
  • Correct or Normalise Data on the System.
  • Query or edit the database.
  • Prioritise.

Employees may use information systems to,

  • Action Jobs tasked to them.
  • Query a database.
  • Create orders for customers.

Some of the advantages of using an information system

  • It may aide the speed a process in a business can be completed as all of the data needed is centralised and managed in one place.
  • The information system may enable employees to manage large orders or information as a batch.
  • The information system may be able to prioritise important jobs on the system.
  • Mistakes could be identified by the system and prompt the user to rectify it.
  • The system may improve or identify bottlenecks in the business process.
  • The system may allow for customers to interact with it directly and therefore reduce the time it takes for a business to fulfill a customers desires.
  • The system may be compatible with other systems through an API which can link systems together.

Some of the disadvantages of using an information system

  • If the system is custom or highly specialised making changes to it can be hard or expensive or slow.
  • The information system may be slow which could frustrate users.
  • The system may not have all the features an employee desires or,
  • The system may not allow some of their users to change data that they need to change.
  • The information system may not be suited for its use case.
  • Employees may have preferred the previous method or may not be it savvy enough to use the system.
  • The system may be designed in such a way that mistakes become a problem.
  • The system may be abused by employees for gain. (clocking out early, marking work as completed when it isn’t)
  • If it breaks a business may not be able to function if they are reliant on it.
  • If it breaks it may corrupt data that may be unrecoverable.

Custom Information Systems

And there are many more examples of businesses using information systems. Many of them my abe trivial or bespoke, however there are programs designed to make information systems at a higher level than writing a program for them, One such example is Microsoft Access.

Many businesses will use Microsoft Access or custom programs to create their data and manage company process. Added advantages of using a custom program is that the company may use a single program (or a single database) for a large business process are,

  • Having a custom program allows the business to construct the data they wish to use when they need to, such as recording information that other companies may not.
  • Using a custom program may allow for the business to create specific access control levels.
  • Customisation like company logos or specific company colors or themes.
  • Many Many more…

 

Factors Influencing Demand

A Demand and Supply Graph

Demand and Supply Graph

Factors Influencing Demand

This article serves to supplement the article Influences for Supply and Demand, that I wrote a while ago. For a more general overview of supply and demand, I suggest visiting there first.

Demand has many factors that influence a market, such as;-

  • Changes to the prices to substitute products, such as cheaper products available online or at discount stores could reduce the sales of a premium product or product range.
  • Changes to the availability of complementary goods or changes in the price of complementary goods, such as two large luxury opposing ice cream companies.
  • Disruptions to the supply chain of competitors, such that their prices or other aspects change.
  • The incomes of customers could rise, causing customers to choose superior or premium products, similarly, they could fall and choose less or inferior products, Especially prominent for Elastic products or Luxury Items.
  • Advertising could increase consumer interest or make the product more noticeable to customers or potential customers.
  • Branding or PR could be used more prominently or advertised.
    • Recently companies have opted for using social marketing or guerilla marketing, as it can be more successful or noticeable since ad-blockers and the fall of cable TV and TV Advertising have made it harder to reach consumers.
  • Advertising or Branding of other competitors products could also potentially boost your own profits, especially if the product is generic or seasonal.
  • Changes to consumer incomes.

The demand for a product or service may also depend on the demographics of the product, if it is aimed at older people and the area is a student town, finding customers may be more difficult than other locations.

External Shocks, such as the economy or new technologies that make the product or service obsolete could also negatively affect the products demand if a business fails to innovate or adapt to change.

Factors Influencing Supply

A Demand and Supply Graph

Demand and Supply Graph

Factors Influencing Supply

This article serves to supplement the article Influences for Supply and Demand, that I wrote a while ago. For a more general overview of supply and demand, I suggest visiting there first.

Supply has many factors that influence a market, such as;-

  • The availability of raw materials.
  • The time it takes to process a set, batch or quantity of stock, like aged wine or hard sweets.
  • Disruptions to the distribution chain of competitors, such that their prices or other aspects change.
  • Natural Disasters utility supply issues or storage issues.
  • Advertising could increase consumer interest or make the product more noticeable to customers or potential customers and cause a shortage due to unforeseen interest or popularity.
  • Branding or PR could be used more prominently or advertised to cause similar consequence.
  • New Machinery or Technology could make the production of items much less time consuming or much cheaper such as new methods of batch processing.
  • A monopoly may artificially limit the availability or raise the price or perform anti-competitively.
  • Automation could speed up production and therefore increase availability.
  • Government Subsidy or Tariffs could increase or decrease supply in a domestic market.
    • A subsidy devised to increase sales in a companies domestic market could raise consumer interest.
    • A company may be forced to maintain a domestic market orientation as shipping externally may not be competitive due to tariffs.

The overall effectiveness of a product is readily available to be supplied by manufacturers depends on consumer interest, the availability of raw materials and the lead time it takes to produce a product.

Agricultural products may be much harder to maintain during droughts or other natural disasters as they take the time to grow naturally and no amount of investment can speed up the process much more than what people are willing to pay for.

Critical Path Analysis

Critical Path Analysis has ties with corporate strategy and human resources. It enables a business to gain a competitive advantage by effectively planning their time to pursue a goal. This can be especially important when they are trying to be first to market or when the process requires a lot of routine steps. It is also relevant in the computing sector and neural networks.

Detailing the steps involved can help to create a better picture of the complexity of a project. To do this, Critical Path Analysis Diagrams are used to break down the project into stages.

Critical Path Nodes

Each stage is made up of nodes, and each node is made of three numbers, the nodes are the circles in the image above (there are two) and have a path between them, Each path has the project that will be completed on the top and the time on the bottom.

Each node has a number on the left half, the earliest start time on the top and the latest finishing time on the bottom. Some diagrams also denote the direction of the path, however, it usually starts on the left, and ends on the right.

Some Critical Path Analysis Diagrams can become complex and take a long time to complete, some stages may also require few or many steps to complete, it is for this reason that Critical Paths are also shown on a diagram.

Critical Path with Four Nodes

In the diagram above, there are four nodes and therefore more work to be completed, however having a top and bottom section has so far proven redundant. It is only when there is an alternate path that these nodes become useful.

Critical Path Analysis Network with a denoted Critical Path

We can now see that having the latest finish time has meant that the project now cannot be finished until the ninth day as the task ‘Air Transport’ Requires a longer time period than the other tasks. This is why the fourth node now reads ‘9’ on the latest finish time. Additionally, there is now dashes along the Critical Path as this task must be completed in order for the project to remain on time.

Critical Path Advantages

Finding the critical path of a project allows a business too;

  • Conduct better contingency planning as they can see clearly where projects have the potential to get held up in the process and aren’t slowed down due to failures in the system.
  • Optimize workflow for employees as they will be able to better manage the time they need to complete a task, should a task have a long lead time, the task could be delayed without affecting the progress of the project, for example, a node having a quicker ‘earliest start time’ than other tasks.
  • Allows a job to be completed in the shortest amount of time possible.
  • It can help to reduce risk on projects that have complex time dependencies.

Critical Path Disadvantages

  • However, it does not account for the likelihood of failure of a task where it was poorly planned from the beginning.
  • It does not account for the fact that a project may eventually have stages that need changing as time progresses or situations change.
  • It depends on the accuracy of the projects predicted time-scale.
  • It may not account for other factors like cost or trade-off.
  • Resources may not be as flexible in the long term as previously planned.

Advantages and Disadvantages of Capital and Labour Intensive Production

In Business, production generally has two techniques;

  • Labour Intensive Production aims to use a large workforce to complete work by hand, this usually employs a lot of people to create a product. Some products may be seen to have more value if they were manufactured by hand.
  • Capital Intensive Production aims to create a product using as little people as possible, the process could be entirely or partially automated and can sometimes be used to assist individuals in manufacture, such as a custom robotic factory worker that moves parts of a product to assembly, or a robot that screws in multiple screws at once. The aim of these tools is to make the job simple or quicker than manual labour, in order to product multiple product in a given time. Production machinery may be very expensive, but aims to be cheaper than labour intensive production in the long run.

labour intensive production

Labour Intensive Production

Labour costs are higher than capital intensive production, however they can vary. If the task is simple then automation may not be necessary. Labour Intensive production will generally have lower running cost than capital intensive production, as workers will perform most of the tasks. Firms can benifit from access to low-cost labour as the job will likely be low skilled.

  • Businesses can benefit from premium pricing for ‘hand crafted’ goods.
  • There is generally better quality if it is not a fast process.
  • Labour costs can be lower if businesses hire on temporary contracts. Individuals will not need to operate specialised machinery.
  • Some businesses can use a flexible workforce to make sure that locations are staffed efficiently.
  • Labour Intensive production allows for improvement easily compared to capital intensive production.
  • Observation is easier.
  • Lower Break-even output.

automotive-production-line-2 capital intensive production

Capital Intensive Production

  • There is generally a better consistency than manual labour.
  • Businesses can loose competitiveness as they are stuck in the same production technique.
  • Machinery may become obsolete.
  • You can’t make businesses such as a restaurant or hotel capital intensive as customers may feel that their stay was devalued by it.
  • May generate resistance from labour workforce when implementing.
  • Kanban systems are easier to implement.
  • There may be a greater loss if there is a fault.
  • Programmed machines do not loose skill and there is no skill shortage for machines.
  • Potentially High labour costs if individuals need to maintain complex machines.
  • Firms can benefit from access to long term financing.
  • Labour is more specialised so individuals are good at their job.
  • There is usually longer term benefits.
  • Robots do not require pay.
  • Costs are mainly fixed.
  • There is therefore usually a higher break-even output.

Trade-offs and Opportunity Cost

What is Trade-offs and Opportunity Cost?

Trade-offs are choosing one thing over another, if you choose to invest in paint over pencils, your opportunity cost, is that you can no longer colour with pencils. This is a poor example, so lets look at some real data so we can get a good understanding of what opportunity cost is really about, and for that we need an example.

Nails and Hammers LTD.

A company, called Nails and Hammers LTD, produces hammers and nails, they have a good reputation, but are not really known, they also manufacture their hammers cheaply and therefore some of them are not exactly to the highest quality. in their first year, they only sell 100 units, this is barely enough sales to keep the business going, so they decide to invest in one of two strategies. Investing in Machinery, in order to produce better quality hammers, or Invest in Advertising, to get the word out about their Hammers and Nails. They decide that they will spend $300 dollars in the second year and see how it goes. They do their market research and come up with these two graphs.

 

tradeoffs and opportunity cost of both types proving advertising is optimal

 

It can be seen from these graphs, that investment in advertisements will produce more sales than investment in machinery, therefore investment in Advertising is the way forward for Nails and Hammers LTD. This is called a trade-off, without the graph, it wouldn’t be known which is better for sales until the second year had ended. The same investment of $300 produced more sales. Lets, look at more data.

Opportunity Cost

Opportunity cost is essentially what you could have won if you had invested in something else, if you can only learn piano or tennis, and you choose piano, the opportunity cost is that you could have learnt tennis.

Trade offs and Opportunity cost orange showing 200 after 3rd year

Let’s take our previous example, and pretend that we invested in the lesser option, Machinery, we can see that we didn’t make as much as we would have if we had invested in Advertising. The opportunity cost in the third year would have been 200, because the investment in advertising, produced 700 sales, minus our 500 sales.

 

Advantages and Disadvantages of a Public Limited Company

What is a Public Limited Company?

A Public Limited Company is a business that has decided to offer it’s shares on the public stock market. The Stock Market is where anyone can invest in a Public Limited Company. These are usually high value, large businesses that can have massive profits, and offer dividends to those who invest.

In order to become a Public Limited Company, PLC, you need;

  • At least two directors.
  • A Secretary
  • And you must float at least $50,000 shares on the stock exchange, to become a PLC.

Unlike other businesses, a PLC is often owned by a board of directors, that dictate the decisions of a business. PLC’s must also pay Dividend, which is money that the investors receive from the business, determined by their share value. As PLC’s have external influences, they also fluctuate in value and therefore can loose money. Some businesses owners also find that they can loose control. Being a PLC can bring in more capital and make the business more known publically on the sock exchange.chart market up of public limited company

For contrast, to become a Sole Trader. All you have to do is contact HMRC (Her Majesty’s Revenue and Customs) and every year fill in a self assessment. An LTD must send a Memorandum of Association and Articles of Association. For this reason it becomes a lot harder to do so and often people will employ a Secretary. To be a PLC can take lots of time and can sometimes not be possible for companies with a very bad image. Companies also may struggle if they are unreliable or have seasonal traits, such as a manufacturer of Christmas gifts.

Advantages of a Public Limited Company

  • Having Shares will fund expansion, allowing the business to grow.
  • This also raises company profile.
  • The business can raise a lot of capital because there is no limit for shareholders to invest.
  • Shares are transferable, so investors can split profits.
  • You can get input from investors.
  • Investors may try to grow the business, through things like discounted advertising, if they own part of another business.

Disadvantages of being a Public Limited Company

  • There could be a possible loss of control, as people may find that shareholders own over 50% of the shares, entitling them to the ownership of the business. This is also known as a divorce of control.
  • Shareholders may have other plans to maximise profits over social and ethical goals.
  • Share prices could collapse.
  • There are a lot of legal formalities.
  • Fluctuations in share price could make a company worthless overnight.
  • PLC’s are hard to maintain. As they are usually large, often everyone has their own ideas.
  • Some companies may be overvalued.
  • Some do not have $50,000 worth of shares to float.

A PLC is usually for large companies. Small businesses will not always expect to grow, Corner shops for example, will not grow beyond what is possible due to the local footfall. Therefore PLC’s are often global businesses.

Advantages and Disadvantages of Types of Processing data

When data is processed there are multiple methods of processing data, there are several types that all have individual Advantages and Disadvantages.

Batch, Interactive and Transaction Processing

 

Batch Processing

Batch Processing is when data is processed in ‘batches’ (groups)

Advantages

  • Batches mean that the process does not require human interaction, this allows the system to be automated and means that it can be left running for multiple sessions at a time, that could potentially last a long time, This type of process can also allow for custom processing ‘jobs’. Which means that the data can be suited to fit the needs of the user, for example, a bank wants to process a large quantity of bank statements, with a temporary notice at the top, they would be able to customize the ‘job’ to be processed with the new notice.
  • They can take a long time to process and may require multiple hours to complete, they may also require multiple retrys and query’s, so being able to compute data in batches means that all the necessary data can be consolidated for the job.
  • Batch processing also means that the data can be run at low points when there is little load on the system.

Disadvantages

  • Using ‘big data’ can take a lot of computing power and can take a long time, and could still process GIGO. (garbage in, garbage out) Stopping batches may cause the system to corrupt the data involved and the system it is using may exhaust the resources of the machine, causing the process to fail.
  • Batch processing could include anomalies that may not have been accounted for, for example when someone had filled out their name on a form as ‘Mr Davies’ when the form only required ‘Davies’, the result could be that a letter that has been batch produced ‘Dear, Mr Mr Davies’.
  • The Batch process could mean that users receive incorrect information until their data has been processed.
  • Data must be accurate to prevent GIGO.

Examples : Mail merge, Bank Statements, Mass Emails, Game World ‘chunks’, Video Rendering.

Interactive Processing

Interactive processing is when a system performs processes as it is being used.

Advantages

  • When playing games, only the crucial information that requires being rendered or physics that need applying to objects need to be processed, allowing for a smoother gameplay. This may also be considered a disadvantage as it can break the immersion of the game when textures are rendered poorly or objects do not have their expected physics, such as objects that do not fall to the ground, or signs do not render their text fully and appear blurred.
  • Websites can check that reservations are not double booked as users place their orders, usernames can be checked for availability as they sign up, emails can be parsed for validity.
  • Websites such as dominoes can start to create an order, before the customer has even completed their order.
  • Video Viewers can set the quality of a video, or it can be done automatically, while the video is playing.

Disadvantages

  • Interactive processing cannot take place on very taxing processes that require a lot of computation.
  • Interactive processing may not be possible until the process is completed
  • Interactive processing may mean that data could become corrupted, such as pausing a rendering video or deleting data that is open by other processes in place.
  • Online Shopping could offer discounted prices are out of date as the offer has expired, but was already added to the customers basket.

Examples : Online Shopping, Video Rendering, Video Live Streams, Booking Seats.

Transaction Processing

 Transaction processing is mode one at a time.

Advantages

  • Transaction processing is fast and efficient, and the data can be updated quickly and securely, booking a seat on a flight and in a cinema ensures that your seat is not double booked.
  • Effective for high traffic websites and concerts where there is high demand for a product.
  • Transaction processing means that customers do not withdraw funds they don’t own.
  • Transaction processing often means that the system can prevent two events happening at the same time.

Disadvantages

  • Transaction Processing requires the transaction to be completed before it is accepted, therefore there can sometimes be considerable wait times before a transaction is complete.
  • Transaction processing means that the system must always be available during operating hours, therefore when a system goes down, there can sometimes be great repercussions.

Examples : Banking, Stock Control Systems, Booking Systems.

The use case for each type can vary, however most have set types that work best for the solution, so it is important to know which one is bet for a solution, or you could run into issues.