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CS507 - Information Systems - Lecture Handout 13

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Organizational Structure

Departments are structured based on the set of related responsibilities. The set of responsibilities being discharged set the tone and structure of that department. The complexity and diversity of these responsibilities also affect how departments are set in an organization.

Existence of Functional departments in every organization vary with the nature of industry and the nature of products/services being offered

Certain departments may not exist in an organization, for instance financial sector (banking, leasing companies) and travel agencies do not incorporate the concept of manufacturing as they belong to the services sector.

Let’s take a look at different departments in different industry segments in order to better understand the concept.

Financial Sector

The departmental structures are different in banking and financial sector. This in turn becomes the basis of design and development of functional information systems. Banks commonly have following departments

  • Treasury
  • Advances
    • Trade Finance
    • Corporate Finance
    • Consumer Banking
  • Deposits
  • Customer Services
    • Lease
    • Credit Card
    • Debit card
  • Operations

Requirements of Information Systems and procedures of financial analysts, investment houses, brokerage houses, leasing companies will depend on their differing functions and needs.

Air Line Industry

Various departments may be

  • Flight Operations department
    • Flight scheduling department
    • Cockpit crew department
    • Cabin Crew department
  • Engineering department – engine maintenance
  • Ground Support – air craft handling department
  • Catering
  • Internal audit
  • Accounts & Finance
  • Sales – ticketing, E-ticketing, agents
  • Marketing
  • Store – engines, maintenance and repair accessories

These departments and their needs determine the design of information systems they require.

As shown in the above two examples, the constitution of departments in both banking institutions and air travel industry vary to a large extent.

Manufacturing Information System

The information needs were and are always there. Information systems used to exist when computerised environments were not available. Automation has enhanced the availability of information.

Every industry has its own departmental structure which gives rise to a different set of sub-systems as part of the information system. Here we would consider the sub-systems of a manufacturing system only. Following are the sub-systems of an information system.

Manufacturing Information System

Raw Material Procurement Sub-System

This is the commencement of the manufacturing process. Some might think of procurement as a simple purchasing process like any other commodity but the spirit of having an all-embracing raw material procurement sub-system is simply more than that.

Parameters of Raw-material Procurement

Like with every system, there has to be a list of minimum specifications which every system or subsystem has to cover. Purchasing logistics of an entity critically affect time to market and other quality related issues. Issues like selection of suppliers, choice between local purchase or import and delivery time taken by the supplier. All these concerns are met and dealt with in the purchase subsystem. The complexity of the purchase subsystem should depend on types of raw materials required, number of suppliers to deal with and complexity of the terms of purchase agreements for long term.

With higher customer expectations, every organization wants to efficiently manage its suppliers and other internal processes. Supply chain management spans all movement and storage of raw materials, work-inprocess inventory, and finished goods from point-of-origin to point-of-consumption. A procurement system should help in improving the supply chain of the organization.

Inventory Sub System

Inventory subsystem focuses on maintaining records and movements on inventory levels and usage. This control of inventory is critical to the organization since money lock-in of raw materials purchase represents substantial investment. Timely production of finished goods require availability of right quantity of material, maintenance of right stock levels, determination of lead times and flex times and exchange of information with supplier at the right time. An inventory subsystem helps us to address these issues. Inventory subsystems are critical where the organization is following Just in Time approach – a philosophy which encourages zero tolerance for stock levels and placing orders exactly when they are needed for manufacturing.

Proper logistic management is important for the timely and quality production. Various factors which can play critical role are

  • Who to purchase from – supplier selection
  • When to purchase – time of delivery or raw materials
  • How much to purchase – Ideal stock levels
  • An efficient inventory subsystem helps us to deal with these issues in a time saving manner.

Production Sub System

It can be seen as the most critical part of the entire manufacturing sub system. Basically it tracks the flow of the job through the entire production process. It also records change in form of goods or transfer of goods from one place to the other.


Consider a manufacturing entity working with three processing departments and one assembly department.
As raw materials pass through the processes, the sub system records the relevant information at specific points or locations until the finished goods are transferred to stock room.

Production Sub System

Maintenance & Scheduling Sub System

For efficient production, the machines should be timely available. Many a times, the machine is under repair and is not available to be used for production. Without this subsystem, there is a possibility of customer’s orders not being met on time. Certain issues that can be very important are

  • Deciding delivery time in accordance with availability of machines.
  • Any foreseen machine-down-time.
  • Any major overhauling / tuning / replacement expected may result in unavailability of machine. An overhauling schedule should be kept so that the production of finished goods is not halted.
  • Avoiding duplication of jobs for the same machine.

Quality Sub system

This subsystem ensures the production made and end product being delivered to the customer are conforming the quality standards set by the company. Quality covers aspects for the organization like better quality raw materials and what is being purchased is according to organization’s standards and improved finished goods in accordance with the customer specification.

The question now arises is why do we need a quality sub-system? It is defined and demanded by customer, it has to be achieved by management, it is a firm wide responsibility and these subsystem provide the firm’s managers with information that reveals the extent to which the firms products are achieving the quality goals.

Total Quality Management (TQM)

TQM is a set of management and control activities which focus on quality assurance. The quality of the products and services is enhanced and then offered to consumers. An organizational undertaking to improve the quality of manufacturing and service, it focuses on obtaining continuous feedback for making improvements and refining existing processes over the long term. There are certain Graphical tools used to implement and promote TQM. For instance

  • Histogram
  • Pareto Analysis
  • Cause & Effect Diagram

Costing Sub System

Costs are incurred more frequently in a manufacturing entity. Monitoring these costs on regular basis requires instituting a formal cost subsystem. Cost sub systems are responsible for generation of cost reports which represent cost break ups on various bases, for instance

  • Machine usage basis
  • Product basis
  • Department wise

Order Processing Sub System

This subsystem deals with following issues.

  • Status of orders placed with suppliers
  • Status of departmental requisitions
  • Quality of materials received
  • Any other issues related to suppliers

Order processing subsystem gives a snapshot of statuses of various orders placed, at any given time.

Management Levels in Manufacturing Information Systems

Manufacturing Information System should cater for information requirements at each level, for instance

Strategic level

  1. Locating new plant which can save cost
  2. Investment in new manufacturing technology

Knowledge Level

  • Distribute knowledge to drive the production process
  • Innovating new forms of manufacturing processes

Management level

  1. Monitoring production costs and resources

Operational Level

  1. Status of production tasks

Planning Productions/Operations

This function in many firms is supported by IT. The major areas of planning and their computerised support are as follows.

  • Materials Requirement Planning (MRP)
  • Manufacturing Resource Planning (MRP II)
  • Automated Software
    • Computer Aided Design (CAD)
    • Computer Aided Manufacturing (CAM)
    • Computer Integrated Manufacturing (CIM)

Materials Requirement Planning (MRP)

Material procurement needs to be planned in compliance with the production Schedule. Initially companies used to do plan it manually through a document termed as “Material Requirement Plan”. Material Requirements Planning (MRP) is software based production planning and inventory control system for material procurement and scheduling.

It helps meeting three objectives:

  • Ensure materials and products are available for production and delivery to customers.
  • Maintain the lowest possible level of inventory.
  • Plan manufacturing activities, delivery schedules and purchasing activities.

MRP helps in getting the right material and physical resources together at the right place and at the right time to meet the customer’s requirements. This helps in achieving on time delivery, High Quality, at the best price.

Manufacturing Resource Planning (MRP II)

An expanded version of MRP that integrates finance, accounting, accounts payable, and other business processes into the MRP system. It also includes production scheduling function, and inventory control functions. It is an integrated computer system that connects the regular MRP to other functional area, especially finance and human resources. It is made up of a variety of functions, each linked together:

  • Business planning
  • Sales and operations planning
  • Production planning
  • Master scheduling
  • Material requirements planning
  • Capacity requirements planning

Benefits of MRP II

MRP II involves the entire company

  • Management business rules for strategic planning can be set, and enforced by MRP II.
  • Sales and Marketing can incorporate sales goals that fit material and capacity constraints.
  • Relationships can be developed with vendors to improve purchasing just in time.
  • Inventory shortages can be seen before they happen, with communications to customers to get approval of substitutions that will get a part that does the same thing, on schedule.'
  • Accounting and finance departments get accurate costs, and predict cash flow.

Automated Tools

IT has been used successfully in cutting the time required for the design of products, services or processes.
Some of these applications are

  • Computer Aided Design (CAD)
  • Computer Aided Manufacturing (CAM)
  • Computer Integrated Manufacturing (CIM)

Computer Aided Design (CAD)

“It is a system that enables drawings to be constructed on a computer screen and subsequently stored, manipulated and updated electronically.”

The ability to rotate or create movement in the design allows testing for clearances and frequently reduces the cost of prototyping the products. The technology is used for a wide variety of products in such fields as architecture, electronics, and aerospace, naval, and automotive engineering. Although CAD systems originally merely automated drafting, they now usually include three-dimensional modeling and computersimulated operation of the model. Rather than having to build prototypes and change components to determine the effects of tolerance ranges, engineers can use computers to simulate operation to determine loads and stresses. For example, an automobile manufacturer might use CAD to calculate the wind drag on several new car-body designs without having to build physical models of each one. In microelectronics, as devices have become smaller and more complex, CAD has become an especially important technology.
Among the benefits of such systems are lower product-development costs and a greatly shortened design cycle. While less expensive CAD systems running on personal computers have become available for do-ityourself home remodeling and simple drafting, state-of-the-art CAD systems running on workstations and mainframe computers are increasingly integrated with computer-aided manufacturing systems.

Computer Aided Manufacturing (CAM)

Computer-aided manufacturing (CAM) is a form of automation where computers communicate work instructions directly to the manufacturing machinery. The technology evolved from the numerically controlled machines of the 1950s, which were directed by a set of coded instructions contained in a punched paper tape. Today a single computer can control banks of robotic milling machines, lathes, welding machines, and other tools, moving the product from machine to machine as each step in the manufacturing process is completed. Such systems allow easy, fast reprogramming from the computer, permitting quick implementation of design changes. The most advanced systems, which are often integrated with computer-aided design systems, can also manage such tasks as parts ordering, scheduling, and tool replacement.

It is a system that uses computer aided techniques to control production facility. Some of these techniques are

  • Computer-aided process planning – Use of computer to control activities and functions to prepare a detailed set of plans and instructions to produce a machine or part. -- Machines
  • Computerised Numerical control (CNC) – refers specifically to the computer control of machine tools for the purpose of (repeatedly) manufacturing complex parts in metal as well as other materials. e.g. drills, wood routers use this technology.
  • Robotics programming – The science or study of the technology associated with the design, fabrication, theory, and application of robots. – Automobile industry.

Computer Integrated Manufacturing (CIM)

Integrated computerized manufacturing system combining all the elements of computer aided design (cad) and computer-aided manufacturing (cam). This is an interactive computer system usually installed on a local area network linking several related departmental functions such as design, engineering, production, and marketing. The concept of CIM insures rapid high-quality product development and manufacturing through real-time coordination of all related functions. See also computer aided design (cad).

Computer-integrated manufacturing (CIM): It is the total integration of Computer Aided Design / Manufacturing and also other business operations and databases. It is concept/philosophy about the implementation of various integrated computer systems in factory automation.

Computer Integrated Manufacturing (CIM) Goals

CIM has three basic goals

  • Simplification of all manufacturing technologies and techniques
  • Automation of as many of the manufacturing processes as possible by integration of many information technologies like
    • Flexible Manufacturing Systems – a form of flexible automation in which several machine tools are linked together by a material-handling system controlled by a central computer. It is distinguished from an automated production line by its ability to process more than one product style simultaneously.
    • Computer aided Engineering (CAE) -- the application of computer software in engineering to analyze the robustness and performance of components, assemblies, products and manufacturing tools.
    • Just in time (JIT) – A Japanese idea that inventory is manufactured (or acquired) only as the need for it arises or in time to be sold (or used). A major goal is to cut down on inventory investment.
  • Integration and coordination of all the manufacturing aspects through computer hardware and software.