What Are MIS? The Role of Management Information Systems

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If you want to build a stronger business and make educated decisions, management information systems provide a valuable tool for quickly scaling your company. So, what are MIS, and why do they matter?

We’ll explain MIS, the pros and cons, and how you can use them to organize essential information.

Defining MIS

Management information systems (MIS) are the processes organizations have in place to gather, analyze, and organize essential information. They’re used to generate valuable reports that inform decision-makers.

Technological tools play a role in understanding how a system works, but MIS also focuses on studying the people, organizations, and relationships that affect the outcomes of a process.

The objectives of MIS can be broken down into three categories:

Data capture: Gather relevant operational information that decision-makers can use later for strategizing and planning. Data may come from internal or external sources, with multiple collection systems operating simultaneously.

Data processing: Raw data is sorted, analyzed, and summarized to make it more useful. Some data points may be used in calculations and predictions; others may be written up and factored into assessments.

Data storage: All data is saved in case it’s needed again in the future.It should be organized and stored intuitively.

You can also look at MIS as a breakdown of the three words that make up the initialism:

Management: Managers are typically tasked with directing, monitoring, and coaching staff, but they also oversee the planning and organization of initiatives with significant impacts on the company, its partners, and its stakeholders.

Information: Good data is more than information; it’s information with context and value. You should know where it comes from and have access to the unprocessed version so you (or your software) can assess the data without looking through someone else’s lens.

System: A system is a set of interconnected entities that work together toward a common goal.
Why should you have an MIS?

Management information systems make data easier to access and understand, helping businesses make decisions that make sense.

Think about the process you go through when you need a quick answer to a crucial question. For example, what if you need to know how many of your client accounts were more than 90 days past due? Or which products sold best during a specific time frame? MIS provides those answers as quickly and accurately as possible.

In short, MIS can help by:

Providing real-time data: MIS tracks metrics continuously, so you know your sales or production numbers are current and correct.

Automating tasks to reduce oversights and errors: MIS can automate tasks based on preset triggers (e.g., sending out a payment reminder when an invoice rolls over from due to past due).

Facilitating teamwork: Sales, customer service, accounts receivable, and the dev team can all look at data simultaneously and discuss options together.

The role of MIS

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A management information system gives leaders accurate and timely insight into individual and company performance. It provides a subjective assessment of how a business is doing.

Essentially, MIS draws a line between assuming (“It seems like the new product launch is going well”) and knowing based on data (“We’ve sold X units in the Y days since launch, which is Z% better than previous product launches”).

Essential MIS components

There are five key components of information systems management:

People: The people who use the information system or will use it in the future are vital to every MIS.

Data: These systems are fueled by data. Some data is gathered manually, whereas other bits of information are gathered automatically through digitized processes.

Business procedures: Organization-specific operations determine how information will be collected, recorded, analyzed, and stored.

Hardware: System hardware includes all the tangible equipment used to gather, store, transmit, and analyze data — computers, networking equipment, servers, and printers.

Software: MIS rely on software programs designed to handle a constant data flow. There will likely be multiple programs in play, with programs meant for compiling data and transmitting info, all working together toward a common goal.

6 types of management information systems

There are six types of management information systems. Each serves a unique purpose using distinct data input.

1. Transaction processing systems (TPS)

Transaction processing systems perform and record tasks in a business’s daily operations. For a restaurant, this might include making and organizing reservations, paying vendors, running customer credit cards, managing payroll, and shipping out merchandise bought from the website.

2. Decision support systems (DSS)

When organizations need help with decision-making or problem-solving, they turn to a decision support system (DSS). A DSS uses data to automate decisions related to a specific problem or need.

For example, consider GPS software. The user tells the system where they need to go while avoiding tolls or stopping at a specified checkpoint. The system then analyzes the possibilities, adjusts for issues like traffic accidents or weather, and provides a route.

3. Executive information systems (EIS)

Executive information systems are expressly designed to assist upper-level leadership. EIS can gather and analyze technology reports, market reports, consultant reports, changes in government policy, and financial info to provide one master report that helps executives manage more efficiently and make stronger, better-informed decisions.

4. Knowledge management systems (KMS)

As the name suggests, knowledge management systems are all about finding, organizing, and sharing information. This info might be shared between employees of a company or between a company and its clients. Software giants such as Canva and HubSpot are prime examples that gather information to share with those who will benefit most.

5. Enterprise resource planning (ERP)

ERPs help companies unify their processes and divisions under one highly functional umbrella. An ERP can help you run your entire business by automating tasks, funneling information where it needs to go, and always keeping you updated.

6. Risk management information system (RMIS)

Unsure whether a business deal is worth the risk? Risk management information systems help you evaluate variables, such as risk exposure and available protection measures. Insurance companies use RMIS to determine the risk level attached to a client or policy.

MIS pros and cons

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Before you adopt a management information system, it’s wise to understand the benefits and potential drawbacks involved.

The right MIS can help you with the following endeavors:

Increase efficiency: If you want to streamline your company’s workflows, MIS can help.

Improve data management: File folders, whether digital or tucked into an actual cabinet, are unwieldy and hard to use. A data management system lets you gather and analyze data efficiently and effectively.

Make fast, well-informed decisions: Forget searching through endless data to find relevant info every time you make a decision. MIS puts knowledge at your fingertips so you understand what you’re looking at as you weigh your options.

Streamline communication: The centralized nature of an MIS encourages collaboration and communication, eliminating pesky email chains and games of telephone.

Outthink and out-strategize the competition: MIS can help you become more competitive in your industry.

Before you invest a chunk in an MIS, consider these potential obstacles and disadvantages:

Initial implementation costs: From purchasing hardware to training employees, an MIS’s startup cost can be surprisingly high.

Tech pitfalls: You’ll need someone to maintain the system and help employees figure out the MIS when they’re confused.

Security risks: Whenever you’re gathering and storing data, you must protect that data from breaches.

Human error: Don’t get too comfortable; even a stellar MIS can’t guarantee your business will be free from human error.

Build a better business with input from Orderful

Inspired by the management information systems examples above? It’s just one capability of a robust electronic data interchange (EDI) integration. You can revolutionize your business using progressive EDI operations and MIS, especially with Orderful on hand to assist. For more information, reach out today and speak to an expert about our EDI solutions.