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According to Panorama’s survey, approximately 83% of companies are staying off obsolete systems of sales, marketing, staff, and finance management now. Modern MIS and ERP systems are helping with that, as their main function is to improve the efficiency of data management and business decision-making.
As we speak, MIS and ERP
are widely used in sales, marketing, finance, logistics, and other industries to track business data and make weighted operational and management decisions. Nevertheless, there is a very significant difference between them: MIS is the designation of systems that control any kind of information, and ERP is a specific type of information. That is, the first is a particular and / or element of the second.
This article will answer the following questions:
- What are MIS and ERP, and how do they work.
- Where are these systems used and what are their advantages and disadvantages.
- What is the difference between MIS and ERP (detail).
What is a Management Information System (MIS)
MIS (Management Information System is a consolidated database that collects and stores all available information about the company’s finances, operations, personnel, and work processes. The essence of the MIS concept is to process business data and submit it in the form of regular reports that provide information support in making management decisions.
The main reason for introducing such systems is to increase the income and profitability of the business. The company’s management and chief technology experts make the decision on the implementation of MIS. Below are the main functions of MIS:
- Data collection and storage. Typically, data is collected from company reporting, e-commerce sites, customer interaction points, social networks, and external information resources related to the company’s activities. This system collects all the information: workflow, communication with clients, work of all departments and moreover – each individual staff member, sales and marketing effectiveness, accounting, production dynamics, and production output. The collected information is stored in a centralized database on cloud servers and / or physical media (HDD, SDD, DVD).
- Data processing. Converting data into meaningful information, which is usually presented in the form of regular reports. The main objective of the system on this aspect is to organize and regularly submit information in a convenient form (tests, infographics, etc. How the data is processed depends on the specific MIS software.
- Data distribution and dissemination. Distribution of relevant information at the right time to the right people (departments). Information may be in the form of a report, message, image, video, audio or file. To facilitate perception, data can be presented in the form of charts, tables or graphs.
- Forecasting. MIS software can use statistics and historical data to analyze and subsequently predict business processes. Methods depend on the specific software and business areas.
- Planning. Reports and predictive models can be used for procurement plans, production plans, and the like.
- Control. Monitoring and tracking of work processes and operations, deviations between current indicators and operational plans.
MIS application area
is usually focused on a specific business, since each area of entrepreneurial activity has its own tasks and requirements for information systems. For example, if this is a restaurant business, then its tasks are: to plan a budget, buy and deliver products, prepare dishes and serve them to customers.
If the restaurant uses MIS, then such a system will be divided into three levels:
- Strategic control. Restaurant owners use the system to determine the target markets, marketing policies and goals of the company, as well as to plan a budget sufficient to achieve these goals.
- Management control. The staff makes a menu on-site, analyzes customer reviews on the quality of food and service. If an order has been placed and then returned, MIS will save this data, including the reason for the refusal. This will help to respond quickly to quality deterioration and track customer wishes.
- Operational control. Here, MIS is responsible for processing work processes using appropriate technologies. For example, when the waiter takes the order and sends it to the kitchen using the terminal, or when the chef uses his terminal to notify “no products”. MIS brings this data together, which greatly simplifies and speeds up the efficiency of processes.
Restaurant business is not the only area that can benefit from the implementation of MIS. These systems are used where it is necessary to streamline and / or accelerate the flow of information: production, finance, sales, production, scientific research, eco-projects or the construction of an international space station. Therefore, any activity where data, workflows and operations can be represented in a “digital” format is a potential environment for the implementation of MIS.
The advantages of management information systems include the following:
MIS also has disadvantages:
- Centralized database. Everybody: from ordinary employees to managers have access to a common database with all the information necessary to perform routine and strategic tasks. This makes workflows smoother as any needed information is always at hand. In addition, data collection methods can be standardized with the help of standard templates; for example, using sample questionnaires or forms.
- Prioritizing. Thanks to MIS, employees can focus on important tasks and not waste time collecting, organizing, analyzing, and distributing data manually. This saves the company labor and increases employees’ productivity.
- Developed algorithm of decision-making. Most MIS software has data processing tools that create reports based on data introduced by several sources, which significantly simplifies material management, workload management, etc.
- Increased Personal Responsibility. MIS has a set of tools to monitor the actions of all users, so you can very quickly find the person responsible for a specific decision, action, or change, analyze the effectiveness of employees’ actions in terms of time expenditure and specific decision-making. That is, thanks to MIS, you can easily find out who made a mistake, and vice versa, whose performance is higher than others’.
- Fewer paper documents. At MIS, employees get access to information from the company’s network without using paper documents. This not only speeds up the whole process, but also helps reduce the cost of paper, printers, ink, etc., and also has a positive impact on the environment, which is good for the company’s environment as well as its favorable image in the eyes of the clients and controlling bodies.
- Proper financial position. Management or relevant professionals can easily assess the financial condition of the company by checking the MIS performance reports.
- Improved competitiveness. Data storage and processing with MISs much quicker and easier than using more conventional solutions. Processing of clients’ requests is proceeding faster, which helps retain users better. Employees get rid of routine tasks and become extra motivated to work. In such a way, companies achieve better results in two important work areas at once.
- High cost. Since MIS is focused on a specific business and requires an individual approach, the development of such software can cost a fortune. Thus, MIS is the choice of medium and large companies that can afford large long-term investments.
- Compatibility issues. In order to use MIS, your business must have standardized methods for collecting, analyzing and distributing data, and this data must be of high quality. Business processes must also be standardized.
- Limited functionality. Ready solutions don’t always contain all necessary features and they may include many redundant (unused) features. There’s no possibility to pay solely for necessary and useful functionality. MIS will be digitizing and standardizing business processes in your company considering its specificities and nuances. Highly qualified specialists, whose work costs a lot, are needed to develop and implement unique software.
- Need to train staff. When implementing MIS, you need to spend some time and money on training employees on how to work with the new system because it requires specific knowledge and skills, but in the end, all investments will be paid off, so this disadvantage is quite questionable.
What will happen if you do not take into account compatibility issues and neglect staff training, is described in the article “ERP System Development Process: Key Tips”: multimillion-dollar losses, lawsuits, loss of markets and reputation. Use the negative experiences of Nike, PG&E, HP, Woolworths and Target to avoid this development.
Scope of application of MIS
MIS solutions are most frequently used to optimize and accelerate the exchange of information among the departments of accounting, marketing, sales, production, etc. A system with SAP (Systems, Applications and Products in Data Processing) is useful almost for any enterprise, where there is a necessity to digitize and systematize data according to production requirements. Development or integration of MIS is adapting to the requirement of a specific type of company. For instance, key features for the production are:
This system provides three main management segments:
- Calculation of production based on the analysis of trends in demand and actual sales.
- Raw materials purchase planning
- Strategic ─ top management level. Collection and analysis of data about main sales markets, marketing tools, and sales channels; budget planning.
- Management ─ a middle management level. Effective control of employees’ working process, production output, and volume of defective goods.
- Operational ─ low-level employees. Data collection and analysis at all stages of production allows optimizing low-level operational processes and automating management.
Broad functionality has caused the formation of separate solutions, which are focused on definite capabilities; in particular, ERP (enterprise resource planning), which will be presented below, and lesser-known DSS (decision support system), OAS (office automation system), SCM (supply chain management), CRM (customer relationship management), KMS (knowledge management system).
What is an enterprise resource planning system
ERP (Enterprise resource planning)
is a special software solution responsible for planning operations with available and future resources, or more precisely – an operating system of process management, which operates with data on company resources. As a rule, ERP is a part of a larger management information system, which is at the forefront of routine operation simplification by providing managers with analytical information and tools to facilitate critical internal business processes.
Currently, this component is even more popular among large and small enterprises than classic MIS because it’s customized to more specialized tasks.
The main functions of ERP-systems:
- Accounting. Data collection and management of accounts receivable and payable, tax payments, payroll and time tracking. To track the status and manage accounting, ERP-systems use special tools that are usually created for a specific jurisdiction.
- Production. A common centralized interface for managing production processes: procurements, budgeting, forecasting and planning. This makes it easier to work with suppliers and customers.
- Business analytics. Collection, storage and analysis of data that are generated during the work of the enterprise for making more effective management decisions.
- Communication. A common database accelerates workflows and enhances employee discipline.
ERP application area
Who uses ERP systems?
Panorama studies have shown
, that 80% of enterprises are either in the process of implementation or are already using ERP systems because a specialized decision is always prioritized over a general one. This is mainly a business in the field of retail, logistics, production, distribution, finance, real estate, and information technology. Recently, ERP solutions based on distribution registers have been popular: blockchain, Tangle, Hashgraph.
Depending on the application, ERP covers the following:
- Finance: account book, fixed assets, payables and receivables, payments, financial consolidation, cash management and various fees.
- Staff: recruitment, listing, training, payroll, pension contributions, benefit, diversity management, retirement.
- Production: equipment, bill of materials, production processes and premises, operational process management, production and product quality control, product life cycle management, etc.
- Sales: pricing, input and execution of the order, checking the balance of the buyer, the ability to communicate, reporting, sales analysis, commissioning.
- Supply Chain: planning, O2C, product configurator, procurements, stocks, warehousing, claims processing, (receipt, storage, packaging, boxing).
- Projects: project and resource planning, calculation, work breakdown, time and cost, billing, units of performance and activity management.
- CRM: marketing, sales, service, commissions, customer contacts, support.
- Data Transfer: self-service interfaces for company employees (with different roles), suppliers and customers.
- Accounting: cost management, budgeting, calculation.
Advantages and disadvantages of ERP
The main advantages of ERP-systems over similar software solutions are considered:
The disadvantages of ERP systems are:
- Simplified reporting. ERP solutions usually have a built-in report template or employees can create custom reports.
- Planning upgrade: software has the capacity to prepare needed supplies of materials, raw materials, control the occupancy of storage units.
- Increased efficiency. Like MIS, ERP software reduces the number of repetitive manual processes, and the team can focus on more important tasks.
- Data Protection. These systems have several tools for protecting data: firstly, different access levels, secondly, data is stored in one database, and not in different sources, which simplifies system protection, thirdly, ERP back up important data.
- Improved business processes. Resource planning systems provide timely access to data.
- Improved supply chain management. Improvements that ERP can offer include minimizing order processing time, more timely deliveries, and automating a significant portion of workflows.
- Scalability. If a company plans to open a new branch, expand its customer base or launch a new project, there is almost always an opportunity to scale the ERP system up for various sizes of organizations and adjust it to specific needs.
- Unified network. The platform is controlling all departments simultaneously. The company’s working capacity won’t drop even if all employees start working on one file.
- Data control. The system contains, controls, and helps to handle the information on the company’s personnel, suppliers, and clients.
Specifics of implementation
- Cost. Most of these systems are distributed by subscription, which involves the payment of those functions that are needed there, as well as all the others. In addition, if you do not make a payment, then all or almost all ERP functions will be blocked, which will create a lot of problems.
- Complexity. Particular skills are needed to put them into operation, which brings management to the search for needed specialists and to adding another expense item to a business plan.
- High requirements for working equipment. It’s pointless to expect high-quality work of the system without reliable servers and storage programs.
- Necessity for additional data protection. Information in a cloud like any other is susceptible to stealing, stuffing, and damaging. Out-of-the-box options are not significantly more reliable: if a violator is in the territory of an organization, he can still hack the systems resulting in a need for qualified protection against hacker attacks.
- Energy dependence. This is a problem of all similar systems. Any failure in a system of energy supply and energy consumption can lead to data loss or a rollback to the previous levels.
- Synchronization. Any ERP requires your business processes and reporting to be standardized, reliable and not generate false data.
The implementation process of ERP systems is far from simple. Initially, it’s the integration of the most important blocks, which embody the basis of the company’s activity. As a rule, these are such parts of architecture as the platform (a base with minimum capabilities, i.e. the environment) and «control of the money», where the database is stored, methods of array storage and processing are considered, and the software to work with them. Then the rest, which is related to separate less-significant departments, is embedded.
Conclusion: the main differences between MIS and ERP
To sum up, the following differences can be identified. First of all, as it was stated in the beginning, MIS is a more general concept of information; more precisely – an entire class of management systems, a special case of which is ERP as information on resources.
The result is a certain difference in specifics of interaction with data.
The task of MIS is primarily to work with accounts and reports, i.e. collection, storage, and processing of information from certain sources. ERP aims at the automation of business processes and accounting, which are related to the company’s resource management. On top of that, ERP has features of monitoring the current state of the business, analyzing, and forecasting future activity and development.
As stated at the very beginning, an enterprise resource planning (ERP) system is a special case and / or element of a management information system (MIS). The main difference between the two: