By: Mr Hashem AlaidarosMIS 211

Lecture 2Title: General System Model of a

FirmCase Study: Supermarket

Main pointsPhysical and Virtual SystemGeneral System Model (GSM)

Case Study: GSM of SupermarketPhysical ResourcesManagementInformation ProcessorStandardsMIS

Physical and Virtual System Physical System of the firm consists of tangible resources. Examples: materials, personnel, machines and money

Virtual system consists of the information resources that are used to represent the physical system

Example: Computer-based file

An inventory storeroom containing inventory items is a physical system, and the computer-based inventory master file is a virtual system that represent the physical system

The firm and its environment The physical system of a firm is an open system in that it

interfaces with its environment Firms take resources from their environments, transforms

these resources into products and services, and return the transformed resources to the environment

Figure 2.1 shows this flow of resources from the environment, through the firm, and back to the environment

The flow of physical resources is at the bottom and the flow of conceptual (virtual) resources is at the top

General System ModelFigure 2.1 shows the following two flows:

1. The Physical Resource Flow: includes personnel, material, machines, and money

2. The Virtual Resource Flow: The arrows in the upper part of the figure show data, information, and decision-related information. At right, a 2-way flow of data and information that connects the firm to its environment

GSMThe Firm's Control Mechanism: The elements that enable the firm to operate as a closed-loop

system are shown in the upper portion of the diagram

The Feedback (close) Loop: Data are gathered from the firm and from the environment

and entered into the information processor, which transform it into information. The information is made available to managers to make decisions to affect necessary changes in the physical system

GSMStandard:Managers is guided in its decision making by the firm’s

performance standard. These performance standards can also be used by the information processor to determine when the firm is not performing as planned.

GSMEnvironmental elements are organizations or

individuals that exist outside the firm and have a direct or indirect influence on it.

Case Study of GSM:Supermarket

GSM of a supermarketExplain the General System Model of a Supermarket

including:Physical resourcesManagementInformation ProcessorStandardMIS

Physical resources• All of the physical resources flow through the physical

system of a supermarket. • Physical resources: Material, personnel, machines, money

1. Material: The primary flow is materials -- groceries and other items that are sold.

2. Personnel: The personnel flow consists of the store managers, the checkout clerks, stock clerks, and so on who are hired, work for a period of time, and eventually leave.

Cont.3. Machines: A few machines are used in a supermarket. The

bar code readers at the checkout counters are the most obvious, but there are others behind the scenes, such as computers, desk calculators, and telephones.

• Additionally, other resources in the machines category include the refrigerated coolers, display cases, and shelves that are used to store the merchandise awaiting sale.

4. Money: The flow of money into the supermarket is provided by customers, and the flow out is primarily in the form of payments to suppliers, employees, and owners.

Cont.The transformation process, It includes:1. arranging the items on the shelves. 2. preparing fresh vegetables and fruits for display, cutting

meat, and perhaps baking pastries and preparing deli items.

3. All activity that makes the products conveniently and attractively available for sale can be considered transformation.

ManagementThe management element in the conceptual

system consists of the store manager and assistant managers.

Information processor• The information processor is the store computer,

which controls the bar code readers and provides the prices of the various items. The computer also transmits data to the headquarters that specifies items to be ordered, provides sales statistics, and so on.

Standard• The standards of performance for the supermarket

are jointly established by headquarters and the store management.

• Standards in the form of sales quotas and operating budgets give managers guidelines concerning the level of performance that is to be achieved. Managers use observation and the information processor to monitor actual performance and compare it to the standards.

MIS• Managers receive reports (information) from information

processor that show: • which items are selling well and which are not• the times during the day and the days during the week

when sales are very high and very low. • The managers respond to these reports by taking such

decisions as adjusting order quantities, reallocating shelf space, putting items on sale, and adding promotional signs and displays.

Standard and ObjectivesStandards

Measure of acceptable performance

Usually stated in specific terms

Used to control physical system

Consists of: Management Information processor Standards

ObjectivesOverall goal that a

system is to obtainSystems have one or

more objectives

A Comparison of Objectives and StandardsObjectivesObjectives Standards of Performance Standards of Performance

Achieve an annual sales volume of at least $25 millionAchieve an annual sales volume of at least $25 millionMaintain a 20% share of the marketMaintain a 20% share of the marketMaintain an annual growth rate of 15%Maintain an annual growth rate of 15%

Realize an after-tax profit of 15% of salesRealize an after-tax profit of 15% of salesMaintain a record of accident-free daysMaintain a record of accident-free days

Invest in a minimum of 15% of sales revenue in research and Invest in a minimum of 15% of sales revenue in research and developmentdevelopment

Achieve stockout on no more than 2% of the items in inventory Achieve stockout on no more than 2% of the items in inventory during the yearduring the year

Have no legal actions filed against the firm by customers, Have no legal actions filed against the firm by customers, suppliers, and the governmentsuppliers, and the government

Satisfy Customer Satisfy Customer NeedsNeeds

Operate efficientlyOperate efficiently

Invest in the futureInvest in the future

Develop sources of Develop sources of supplysupply

Operate ethicallyOperate ethically6-21