Information systems play a crucial role in managing data and enabling organizations to function efficiently. This article explains 5 of the most common categories of information systems with examples of how they are utilized in business. Gain insight into these vital organizational tools.
What are Information Systems?
Information systems are integrated sets of components used to collect, store, process and distribute data and information. They support business operations and decision-making across all levels and functions. Information systems transform raw data into meaningful information which is communicated to various users.
There are multiple types of information systems designed for different purposes. The main ones are:
- Transaction processing systems (TPS)
- Management information systems (MIS)
- Decision support systems (DSS)
- Executive information systems (EIS)
- Enterprise resource planning (ERP) systems
The appropriate systems and exact configuration depends on an organization‘s specific needs. Yet most utilize a combination of these key systems in some form to maximize efficiency.
Transaction Processing Systems (TPS)
Purpose: Process and record routine day-to-day business transactions, like payments or orders.
Transaction processing systems (TPS) are systems where companies input and collect data related daily business activities. The goal of TPS is to ensure transactions are valid, properly recorded and processed efficiently.
For example, when a customer places an online order, the company‘s TPS records the sale, updates inventory levels, processes payment, and generates an order confirmation. TPS monitors transactions in real-time as events occur.
Components of TPS include input devices like barcode scanners, software/applications, and output devices like receipts or screens. TPS emphasizes speed, accuracy and productivity in handling high transaction volumes. They form the core foundation many other systems build upon.
Management Information Systems (MIS)
Purpose: Generate preset reports and summaries of business operations to support planning and decision making.
Management information systems (MIS) provide key, periodic information needed for sound organizational management. MIS utilizes TPS transaction data as well as data from external sources. It summarizes and reports this data as usable information for managers to track performance and status.
For instance, an MIS retail report may show daily sales figures, returns by department, conversion rates, inventory turnover rate and other KPIs. Reports can be scheduled, on-demand or real-time depending on needs. MIS enables monitoring operations, progress towards goals and issues requiring action.
Decision Support Systems (DSS)
Purpose: Assist with making choices by modeling outcomes and analyzing relevant data to identify solutions.
Decision support systems (DSS) are interactive systems that utilize advanced analytics, visualize data and predict outcomes to enhance and automate decision making. DSS may access internal TPS/MIS data plus external information to uncover trends and patterns.
DSS features like regression analysis, optimization algorithms, and "what-if" scenario modelling are leveraged to evaluate options and forecast results. Users can adjust assumptions to compare alternatives. For example, financial planning software is a common DSS that recommends investments aligned with targets.
Executive Information Systems (EIS)
Purpose: Supply critical, summarized information and analytics to executives for strategic planning and management.
Executive information systems (EIS) condense and package information from MIS, DSS and other sources into key summaries custom-tailored for executives. The user-friendly dashboards and interfaces prioritize graphical displays over details or data.
EIS focuses on delivering timely, pertinent information and alerts critical for executive decision making related to goals, objectives and innovation. For example, a CEO may utilize an EIS dashboard with key weekly/monthly performance metrics, progress towards strategic targets, competitor data, and economic trends.
Enterprise Resource Planning (ERP) Systems
Purpose: Integrate and coordinate all business functions, data and processes across departments and locations into a unified system accessible enterprise-wide.
Enterprise resource planning (ERP) software consolidates all facets of operations, including manufacturing, supply chain, inventory, sales, finance, HR and more into a holistic, integrated computer system with a common database. This creates enhanced consistency, efficiencies and communication.
ERP replaces legacy standalone systems to unify global business management. Functions which once operated in departmental silos using separate databases can now collaborate in real-time on one platform. Vital information is synced across locations. Resources are optimized based on total needs.
For instance, when a sales order is entered, the ERP automatically checks product availability, updates inventory levels, triggers manufacturing and scheduling if items are out of stock, and notifies accounting for billing – all in one seamless automated process.
Different types of information systems serve important specialized roles in managing, analyzing, interpreting and communicating essential data across all levels of enterprise. TPS facilitates transactions, MIS delivers operational reports, DSS enables predictive modelling for decision making, EIS offers executive dashboards while ERP ties integration of companywide systems.
Organizations rely extensively on optimized information systems working in concert to drive productivity, growth and success in a rapidly evolving digital environment. The configuration of systems must align strategically with business needs and priorities based on purpose, function and audience ultimately served by the information.
