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The Role of Management Information Systems for Decision Making in Small Business Organizations

Updated on August 9, 2014
Productivity Growth is the Key to Profitability
Productivity Growth is the Key to Profitability | Source

The success of any organization is directly related to the ability of management to make sound business decisions. It is not uncommon for Small Business Enterprises (SBE) to have razor thin margins, multiple supply chains, different inventory price points, limited IT expertise, and inadequately documented business processes. Given these limitations, consistent value creating decision-making is difficult. Management practitioners have found that the more structured the decision process, the more value one can derive from the use of a decision support system. The use of decision support systems offers the advantages of speed, reduced complexity, consistency, and increased productivity.

Decision Support Architecture

Business leaders rely on information from multiple databases to support their daily decision-making. These databases allow a company to match available inventory with customer orders, create invoices, monitor payments, and manage customer relationships. According to recent research, organizations that leverage technology make better decisions resulting in higher profits. However, in cases where these databases are not integrated, management cannot be assured optimal business decisions are being made by operating staff personnel.

For example, hundreds of calls are received daily in a typical call center where the in-house sales team is interacting with customers discussing their problems and offering solutions, and entering financial information into a database that must be kept up to date to ensure correct billing. Near real-time decisions are being made by sales staff related to selection of the supply chain, pricing, and solutions offered to accommodate the fast pace of customer requirements (e.g., retail, media, information oriented industries/applications). Technology has made it easier to store historical data, access databases/data warehouses, and process real-time information; therefore, companies have an opportunity to improve and validate the quality of their decisions. Optimized decision-making results in less error, rework, increased productivity, and higher profit margins. For a decision support system to be effective, the interface to the decision maker must be presented in a straightforward, user friendly format. As a first step, companies should integrate existing databases, establish a data warehouse, and evaluate Software-as-a-Service (SaaS) business intelligence software/web-based applications that have the capability to create dashboards, management reports, and perform real-time “what-if” analysis.

Emerging Technologies & Security Risk Mitigation

Information Technologies are deeply embedded in almost all business processes within an organization. Without these systems, it is virtually impossible to manufacture products, source raw materials, or provide services to customers. In addition, it is important to have information flowing between participants within the supply chain. When information is not integrated with suppliers, resellers, logistics, and customers facing functions business is conducted via several telephone calls or emails up and down the supply chain leading to the increased possibility for errors and lost productivity.

The potential reward of linking internal databases, inventory systems (both internal and external), and authorizing remote access by customers is substantial. However, it may also introduce new issues of trust, intellectual property management, ecommerce transaction security, and the potential for attacks on the network. Common reasons why businesses and consumers refrain from participating in electronic commerce is the potential loss of assets and privacy due to concern about breaches in security. Therefore, implementation of risk mitigation processes and procedures will be a critical success factor management must consider before implementing any system. Risk management as a process whereby risks are identified and solutions are implemented to control, mitigate, or eliminate risk to the organization. However, the cost of implementing security measures should be reasonable for the protection provided and the benefits received.

In summary, the use of information technologies to link separate databases and integrate the supply chain offer substantial benefits such as increased productivity and higher operating margins by allowing managers to make better decisions. The Implementation of various information-based technologies impact every part of the organization. Therefore, a process oriented approach should be used to ensure value is being created while minimizing risks.

Author: Prof. Orlando Skelton, MBA

This article is for information purposes only. All trademarks, if any, are acknowledged. The content in this article are the copyright of SCH Consulting © 2014. All rights reserved.

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