Types of Information Systems in a Business Organization

Small businesses are chiefly concerned with getting and keeping customers by producing quality goods or services. Business owners are also faced with the considerable challenge of turning mountains of data into actionable information. Information on sales, client lists, inventory, finances and other aspects of your business needs to be carefully managed. Your information systems can also be important sources of insight for growing your business by containing costs and achieving a competitive advantage.

To best leverage data as a company asset, adopt a formal information strategy for your business.

Transaction Processing System

A small business processes transactions that result from day-to-day business operations, such as the creation of paychecks and purchase orders, using a transaction processing system, or TPS. The TPS, unlike a batch system, requires that users interact with the system in real time to direct the system to collect, store, retrieve and modify data. A user enters transaction data by means of a terminal, and the system immediately stores the data in a database and produces any required output.

For example, a small-business owner may direct a bank system to debit a savings account for $500 and credit the company’s checking account for $500. Because of constant system updates, a user can access current TPS data, such as an account balance, at any point.

Management Information System

Small-business managers and owners rely on an industry-specific management information system, or MIS, to get current and historical operational performance data, such as sales and inventories data. Periodically, the MIS can create prescheduled reports, which company management can use in strategic, tactical and operational planning and operations. For example, an MIS report may be a pie chart that illustrates product sales volume by territory or a graph that illustrates the percentage increase or decrease in a product’s sales over time.

Small-business managers and owners also rely on the MIS to conduct “what-if” ad hoc analyses. For example, a manager might use the system to determine the potential effect on shipping schedules if monthly sales doubled.

Decision Support System

A decision-support system, or DSS, allows small-business managers and owners to use predefined or ad hoc reports to support operations planning and problem-resolution decisions. With DSS, users find answers to specific questions as a means to evaluate the possible impact of a decision before it is implemented. The answers to queries may take the form of a data summary report, such as a product revenue by quarter sales report.

To conduct an analysis, business owners and managers use an interface – a dashboard – to select a particular graphic representation of a key performance indicator that measures the progress toward meeting a specific goal. For example, a manufacturing dashboard might display a graphic representing the number of products manufactured on a particular line.

Executive Support System

The executive support system, or ESS, contains predefined reports that help small-business owners and managers identify long-term trends in support of strategic planning and nonroutine decision making. System users click on any icon displayed on the ESS screen and enter report criteria to view individual predefined reports and graphs, which are based on companywide and functional department data, such as sales, scheduling and cost accounting.

The ESS reports brief the business manager or owner on an issue, such as market trends and buyer preferences.The ESS system also offers analysis tools used to predict outcomes, assess performance and calculate statistics based on existing data.