An IS serves two important functions within an organization. First, the IS mirrors and monitors actions in the operations process by processing, recording, and reporting business events. For example, the IS processes customer orders; records sales to customers by updating sales, accounts receivable, and inventory data; and produces invoices and sales event summaries. This event-based, operations-oriented function is depicted by the horizontal information flows shown along the bottom of Figure 1.5.
The vertical information flows shown in Figure 1.5 highlight the second major function of the IS: to support managerial activities in the management process, including management decision making. How do managers use this information? First, they monitor current operations to keep their ship on course. For example, managers need to know if enough inventory is being produced each day to meet expected demand. Managers’ second use of information is to help them achieve satisfactory results for all of their stakeholders (e.g., customers, stockholders). For example, information can measure attainment of goals regarding product quality, timely deliveries, and cash flow. Finally, managers use the information system to recognize and adapt in a timely manner to trends in the organization’s environment. For example, managers need answers to questions such as: “How does the time it takes us to introduce a new product compare to our competitors?” “Does our unit cost to manufacture compare to our competitors?” 1 Because information systems provide critical support to such management activities, one must understand these activities, including decision making, to understand the features of good information systems.
Why is the Information System important to the organization?