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17 February 2020

The Difference Between MIS and ERP Software

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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. The difference between them is that 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.

In the article we will explain:

  1. What are MIS and ERP, and how do they work.

  2. Where are these systems used and what are their advantages and disadvantages.

  3. What is the difference between MIS and ERP (detail).

What is a Management Information System (MIS)

A centralized database that collects and stores information about the company, its departments, 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 decision on the implementation of MIS is made by the company's management and chief technology experts. Below are the main functions of MIS:

  1. Data collection. 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. MIS collects data on sales, finance, personnel, accounting, manufacturing, market analysis, work processes, customer relationships and the like.

  2. Data storage. The collected information is stored in a centralized database on cloud servers and / or physical media (HDD, SDD, DVD).

  3. Data processing. Converting data into meaningful information, which is usually presented in the form of regular reports. How the data is processed depends on the specific MIS software.

  4. Data distribution. 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.

  5. Forecasting. MIS software can use statistics and historical data to predict business processes. Methods depend on the specific software and business areas.

  6. Planning. Reports and predictive models can be used to plan tasks, for example, how many products to buy or sell.

  7. Control. Monitoring and tracking of work processes and operations, deviations between current indicators and operational plans.

MIS application area

MIS software 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:

  1. 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.

  2. 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.

  3. 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.

Advantages and disadvantages of MIS

The advantages of management information systems include the following:

  1. Unified database. Ordinary employees, mid-level managers and management have access to a common database with all the information necessary to perform operational tasks. This makes workflows smoother. In addition, data collection methods can be standardized, for example, using sample questionnaires or forms.

  2. Prioritizing. Thanks to MIS, employees can focus on important tasks and not waste time collecting, organizing, analyzing, and distributing data manually. This saves labor and increases productivity.

  3. Effectiveness of solutions. Most MIS software has data processing tools that help in managing data, finance, work and material resources.

  4. Increased Responsibility. MIS monitors the actions of all users, so you can very quickly find the person responsible for a specific decision, action or change. That is, thanks to MIS, you can easily find out who made a mistake, and vice versa, who makes them less than others.

  5. Less 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.

  6. Understanding financial position. Management or relevant professionals can easily assess the financial condition of the company by checking the MIS performance reports.

MIS also has disadvantages:

  1. 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.

  2. 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.

  3. 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.

What will happen if you do not take into account compatibility issues and neglect staff training, 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.

What is an enterprise resource planning system

ERP (Enterprise Resource Planning) is a computer system responsible for managing production, sales, marketing, inventory, accounting, personnel and finance. Or, in other words, this is an management information system (MIS), which operates with data on company resources.

The main functions of ERP-systems:

  1. 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.

  2. Production. A common centralized interface for managing production processes: procurements, budgeting, forecasting and planning. This makes it easier to work with suppliers and customers.

  3. Business analytics. Collection, storage and analysis of data that are generated during the work of the enterprise for making more effective management decisions.

  4. 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. 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:

  1. Finance: account book, fixed assets, payables and receivables, payments, financial consolidation, cash management and various fees.

  2. Staff: recruitment, listing, training, payroll, pension contributions, benefit, diversity management, retirement.

  3. Production: equipment, bill of materials, production processes and premises, operational process management, production and product quality control, product life cycle management, etc.

  4. Sales: pricing, input and execution of the order, checking the balance of the buyer, the ability to communicate, reporting, sales analysis, commissioning.

  5. Supply Chain: planning, O2C, product configurator, procurements, stocks, warehousing, claims processing, (receipt, storage, packaging, boxing).

  6. Projects: project and resource planning, calculation, work breakdown, time and cost, billing, units of performance and activity management.

  7. CRM: marketing, sales, service, commissions, customer contacts, support.

  8. Data Transfer: self-service interfaces for company employees (with different roles), suppliers and customers.

  9. Accounting: cost management, budgeting, calculation.

Advantages and disadvantages of ERP

The main advantages of ERP-systems are considered:

  1. Simplified reporting. ERP solutions usually have a built-in report template or employees can create custom reports.

  2. Increased efficiency. Like MIS, ERP software reduces the number of repetitive manual processes, and the team can focus on more important tasks.

  3. 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.

  4. Improved business processes. Resource planning systems provide timely access to data.

  5. Improved supply chain management. Improvements that ERP can offer include minimizing order processing time, more timely deliveries, and automating a significant portion of workflows.

  6. Scalability. If a company plans to open a new branch, expand its customer base or launch a new project, it can almost always use its ERP system “as it is” or modify it.

The disadvantages of ERP systems are:

  1. Cost of ERP systems. 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.

  2. Synchronization. Any ERP requires your business processes and reporting to be standardized, reliable and not generate false data.

Conclusion: the main differences between MIS and ERP

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:

  1. MIS is mainly reporting. Such software collects, stores and processes information from various sources.

  2. ERP is responsible for the automation of business processes and accounting related to the management of company resources. In addition, ERP monitors the current state of the business, analyzes it and helps to make forecasts for future activities and development.

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