Chapter 12 Applications in Manufacturing Sector Book:- Waman S Jawadekar
Introduction This chapter is an introduction to the business applications of MIS. For each application, inputs, which are processed by OLTP system are determined. The system designer develops the applications with the objective of accounting the transaction based results and providing the reports on the same. The second objective is to provide a Query system for assessment of the status on record, result or document. Third objective is to provide a system of analysis of processed data revealing certain business trends or results. The analytical information provides support for decision making in the DSS. Fourth objective is to provide control information to ensure that the business runs as per the plan, progresses in a set direction and achieves the goals. A typical information system begins with OLTP system, uses RDBMS for creation of database, 4 GL for application development and SQL for querying and report generation. 2
Contd A typical IS serves the needs at functional levels such as Personnel, Finance, Production, Materials, Marketing & Corporate Business Mgmt. These systems when integrated provide cross functional information to management high-lighting the business implications of the decisions taken in one area of the business or the other. Integrated systems provide data and information for business planning at the middle management level and for strategic planning at the top management level. 3
Personnel Management (PM) Personnel management function has the primary objective of providing suitable manpower in number and with certain ability, skills and knowledge as the business organization demands from time to time. Following techniques used to control Personnel cost and enhance manpower productivity: Human Resource development through training and upgrading the skills Motivation through leadership and job enrichment. Promotion and rewards through performance appraisal Grievance Handling Structuring the organization 4
PM Contd.. Input Transaction Documents: The various forms or documents serve as inputs for Personnel department are as follows: Personnel application form Appointment letter Attendance and leave record Biodata, self and family Appraisal form Production/Productivity data on the jobs Wage/Salary agreement Record of complaints, grievances, accidents Industry data on wage/salary structure Industry data on manpower, Skills, Qualifications Record of sources of manpower University, Institution, Companies Record on manpower application trend in view of mechanisation, automation and computerisation. Applications The viewers of the database are personnel managers, head of the human resource development department and top management. 5
Personnel Management (PM) Accounting: Following entities are accounted in PMS Attendance Manpower Leave Salary / Wages, statutory deductions Loans and deductions Accidents Production data Skills Bio Data / Family Data Query: Personnel Management has queries as follows Who is who? Strength of section, department, division Number of persons with a particular skill Attendance, leave and absenteeism record of all employees Salary / Wage of employees Designations and number of persons holding these designations Personal records of the employees 6
PM Contd Analysis Analysis of attendance by a class of employees Leave analysis by a group of employees Trend in the leave record Analysis of accidents and types thereof. Analysis of salary/wages structure Analysis of overtime Control Probable absence versus workload Projection of personnel cost against manpower increase Assessment of accident records against safety measures taken Personnel cost versus industry cost and its projection Projection of manpower needs and evolving recruitment and training programmes. Reports: The reports of the system will be used mainly by the personnel department and the top management. 7
Personnel Management (PM) Statutory reports Attendance Muster Strength of the employees by category permanent, trainees & apprentices Provident fund, ESI reports, Ledgers and Returns Accident reports Income tax form 16, 24 A Strength of employees to Director General of Technical Development (DGTD) Information updates Daily attendance report Employee strength Joining and transfers of the employees Personnel cost by department, job, product Periodical statements showing personnel cost by salary/wages, overtime 8
PM Contd Operation update Daily attendance to plan the workload Overtime versus work completed Projected absenteeism and distribution of workload Cost of personnel by jobs or work completed Decision analysis Analysis of attendance for season, festival and by skills, scheduling of the jobs accordingly. Overtime analysis by department, employees and job to decide the strength of personnel Analysis of accidents and deciding on safety measures and training Cost analysis by personnel versus jobs vs skills and planning for new recruitment. Action reports Recruitment and additional manpower or subcontracting of jobs Acceptance of orders on the basis of workload Reduction, transfer & reorganization of employees to control costs Preparation of training & development prog. With specific needs. 9
Person Personnel and HR (PHMS) Management System / Model 1 2 3 Selection process Atten. Record System Attd leave, absence Analysis of Causes, patterns Exception Reports by Causes/ reasons Employee database 4 Employee 5 Payroll Process for eval, Promotion etc 9 Statement process Bank, earnings, Deductions etc Analysis of performance Exception reports Payslip, Returns Stat., advices Finance A/C syst. 6 HR database Process for skills, Knowledge upgrade Certificates Orgn Mgmt 7 8 HR Budgeting, planning Analysis HR Budget Selection Prog. Query process Skill, salary etc Query Response display 10
PHMS Contd 1) Offer acceptance / resume 2) Application form 3) Call, selection, appointment letters 4) Demographics, qualifications 5) Job & performance; appraisal, career profile 6) Skills, capabilities 7) Business plan 8) HR forecast 9) Payroll advice 11
Financial Management (FM) FM function has a primary objective of meeting the financial needs of the business, from time to time, by way of providing working capital and long-term capital to run the business with the goal of containing the cost of capital at the minimum. Second objective of FM is to meet the statutory compliance. Various tools and techniques are used to achieve objectives Break even analysis Capital budgeting and ROI analysis Cost Analysis Cash Flow Projections Ratio analysis Financial modelling Management Accounting Expense analysis, auditing and control 12
Financial Management (FM) Input Transactions Documents Payments: To suppliers, authorities, employees, shareholders, financial institutions and others Receipts: From customers, authorities, employees, financial institutions and others. Data from Stock Exchange of the share prices, consolidated financial results of the other companies, etc. Applications In FM major application is the Financial Accounting System, which accounts for the financial transactions of the company and produces financial results for the company. Accounting: The system accounts for all money transactions which have taken place, directly or indirectly and which affect the company. The FMS accounts for the following: 1) Sales 2) Purchase 3) Salary / Wages 4) Inventory 5) Expenses 6) Capital purchase 7) Fixed Deposits 8) Shareholder s fund 9) Income tax 10) Sales Tax 11) Excise Duty 12) Customs Duty 13) Octroi 14) Consumption 15) Budgets / Fixed Assets 13
Financial Management (FM) Query: The query system throws light on the debit or credit balance of an account. For eg. the query could be on sales with respect to the customer. The query could be on sales of the product. The query is processed for the following with the respective codes as keys Main account Subsidiary account Location (Factory, Branch etc.) Document (Bills, Credit note, Debit note, Receipt, etc.) Decision Analysis: FM calls for a no. of decisions, based on the analysis of the financial status of the company such as borrowing of short term working capital, sources of finance, analysis of debtors and creditors, and revision of credit terms, capital budgeting and selection of investment alternatives etc. The applications which support the above decision are: Cash flow analysis Sources and uses of funds Debtors analysis and aging 14
Financial Management (FM) Creditors analysis and aging Budget analysis Ratio analysis and management norms Capital budgeting and ranking of investment alternatives Cost analysis of various production inputs and alternatives. Control: The cost of running a business increases, when the business does not progress on a planned basis. The lags and leads in activities, delays in completion of tasks and non-performance of certain business functions give rise to additional costs eating away the margin in the business. The control is exercised, based on the exceptions found in the business operations. Some exceptions are as follows: Account receivables, outstanding beyond the acceptable norms Advances to creditors, and non realisation of obligations Valuation of non-moving inventory for disposal Analysis of non-moving accounts and legal actions Shortage of funds in excess of planned and rescheduling of activities, priorities. Cost overruns beyond the norms and action on alternatives. 15
Financial Management (FM) Performance analysis of lines of business showing adverse performance leading to the decision whether to continue or discontinue business. Reports: A major portion of a financial management system is devoted to the statutory compliance and operations update. Statutory compliance Tax returns Registers: Sale Tax, Excise, Tax deducted at source Declaration of certain results to the financial institutions Declaration of financial results to the public every six months Declaration of annual results to the Board, Shareholders and public within a stipulated time. Information updates Monthly trial balance, balance sheet and profit & Loss Account Stock valuation Accounts receivables and aging Accounts payable and aging Expenses on major accounts Cash position Payments and receipts which are statutory obligations 16
Financial Management (FM) Sales, purchase of assets by certain classification Overall business achievements in major lines of business. Operations Update Filing of statutory returns and reports Statutory payments such as advance tax, sales tax, Octroi, Excise Duty etc. Transactions executed and accounted in the system Report on finished goods, dispatches and invoicing Reports on material receipts and payments to the suppliers Obligatory payments such as rents, insurance premium, membership fees, interest and dividend. Decision analysis Break even analysis for cost and price decision ROI analysis for choice of investment Trend analysis on price of selected commodities Cash flow, sources and uses of funds Analysis of current and fixed assets Analysis of current liabilities and decision on liquidation on priority basis Analysis of overdue receivables and decision on revision of terms or commercial and legal actions. 17
Financial Management (FM) Action Update Overdue receivables Legal action Termination of business association Non supply of goods and services but advance paid Legal action Revision of terms Termination of business association Payments to creditors, where penalties are involved Poor usage of fixed assets and disposal Non-moving inventory of, say, more than two years and its disposal Evolving new systems and procedures to control expenses and implementation 18
Production Management (PM) The objective of Production Management (PM) function is to provide manufacturing services to the orgn. This involves the manufacture of products of a certain specified quality and within certain costs in a stipulated time fulfilling the promises given to the customer. The PM function is supported by other functions i.e. Production planning and control, industrial engineering, Maintenance and Quality control. 19
Production Management (PM) Input Transaction Documents: The PM is conducted through innumerable transactions. Production programme Production schedule Process planning sheet Job card Job Status advice Quality assurance rating form Finished goods advice Breakdown advice Material requirement Material requisition Customer order Applications: The PM is performed through production planning and control, bill of material processing, drawing and process planning, scheduling and monitoring systems as support systems. 20
Production Management (PM) Accounting: The accountable entities are as follows: Quantity of production with respect to a time period Material requirement and its usage Rejection quantity at each intermediate stage and the final stage Breakdown incidence Labour complement with respect to a period Use of power, fuel and consumables Machine and facilities utilisation Labour hours Query: Status of the job or order in terms of stage and level of completion Production programme and jobs schedules Load status on machine, group of machines Status on availability of material Standard information on machines, tools, specifications Standard information on skills and capacities of each worker Standard information on products and processes 21
Production Management (PM) Decision analysis: No. of decisions both for long term and short term Make or buy Make or subcontract User of alternative material Use of alternative process Evolving optimum product mix/job mix Rescheduling and loading of jobs Planning and scheduling of jobs Selection of production facilities Selection of alternative maintenance policies. Control: These applications are developed to control production programme, production capacity and quality of production Excessive product rejection on account of material and or process Hold up of key jobs beyond a certain limit Excessive work in process inventory Continued breakdown of the manufacturing facility beyond a certain period Utilisation of key facilities below a limit Continuous significant deviation from standards or norms of production rate. Backlog of large number of orders and failure to meet promised delivery date. 22
PM Reports and Screen display Statutory Compliance: The industries which are classified under Director General of Technical Development (DGTD) are required to inform certain data on production and production hours to DGTD. Information update: The data on the down time of production facilities A typical reason for rejection Output of various job versus machines. Operations update: These reports provide information on day to day events. Statistics such as Production per day The rejections by process or job The machines breakdowns The jobs completed and handed over for inspection Decision Analysis: The decision analysis applications provide the reports with specific key decisions in the production function. The DSS are extensively used to enable the management to take decisions. 23
PM Contd.. Action update: These reports provide information update on the post implementation scenario of decisions. The reports inform whether the decision has resulted into expected performance as designed. It provides an early opportunity to the management to correct its own decision of the expected results fail to come through. For eg. a new process is evolved and implemented. 24
Raw Materials Management (RMM) The objective of Materials Management (RM) is to provide material for production, maintenance and services at economical prices, in a appropriate quantity and quality and with no extra cost of carrying the inventory. The scope of RM is procurement, stocking and control of inventory. The function of RM is important as it takes away large capital as working capital. Secondly, it is important from the point of view of controlling the material cost and the cost of carrying inventory 25
RM Contd.. Input Transaction Document: The RM has the following transactions Purchase requisition Purchase order Receipt of goods Return of goods to supplier Issue for production Return from production Certification of bill for payment External sources such as industrial associations, trade journals etc. Applications: The RM function is conducted through several administrative and management systems Forecasting and planning Procurement Purchase ordering Goods receipt Inspection Issuing the material Processing the returns Bill passing and control 26
PM Contd.. Accounting: The RM function account for a number things as below Purchase quantity Issue quantity Stocks Goods returns Rejections Performance Value of purchase Average or standard rate of accounting Query: Queries are largely centre around price, supplier, stock and pending aspect of purchase, returns and payments. Decision analysis: As materials is the single largest component of the cost, in any manufacturing organization, a majority of the decisions centre around the cost of purchase and the cost of materials consumed. The first major decision in the function is price of an item. The second decision to take is in stocking of items The third is to controlling the item 27