Information System


 An information system is an integrated and coordinated network of components, which are combined together to convert data into a useful set of information.

Any amount of data with basic values or facts is of no use until organized into a database and analyzed into insightful information that can answer questions or solve problems. An information system is that unit consisting of people, processes, machines and information technology that organizes and analyzes data towards producing, distributing and processing information.

Components of Information Systems

An information system is typically made up of five components: hardware, software, database, network, and people; however they may differ in how they are used within an organization.

  • Hardware: It consists of an input/output device, processor, operating system and media devices
  • Software: It consists of various computer programs and procedures
  • Database: It consists of data organized in the required structure like tables, files etc.
  • Network: It consists of hubs, communication media, and network devices
  • People & procedures: People are device operators, network administrators, and system specialists, while procedures describe how and what data is to be processed to get specific answers

How does it work:

These five components integrate to perform input, process, output, feedback, and control. During the input stage, data instructions are fed to the systems which are then processed upon by software programs. During output stage, data is presented in structured format and reports.

Examples of Information Systems

Transaction Processing System

An example is an online air ticket booking system, that collects data from users and generates an airline ticket and a bill. Typical organizational departments that use transaction processing systems are sales, account, finance, plant, engineering, human resource, and marketing. Data can be generated from sales order, cash receipts, accounting, inventory management, depreciation accounting, etc.

Management Information System

A management information system(MIS) is used to oversee the performance of the organization. The results from the TPS are input into the MIS to produce management reports that can predict or control future organizational performance. An MIS can be used in different ways within the enterprise like a budgeting system to gather information to set accurate budget monthly or annually based on reports of how much money has been spent by the organization in a specific period of time. Other examples could be as a sales system analyzing data gathered from point of sales and as a human resource information system for collating information about employees, attendance, performance management etc.

Customer Relationship Systems

CRSs track customer activities, purchasing trends, customer inquiries etc. They allow customers to interact with companies for service, product feedback, and problem resolutions.

Decision Support System

Decision support systems are used by managers to provide solutions to problems that are dynamic in nature. This kind of system uses data from internal systems like TPS and MIS to find the best possible choice or alternative to a given problem. They find answers through statistical analysis and mathematical models.

Office Automation System

OAS is useful to improve the efficiency of employees who are required to perform repetitive tasks of data processing. Office functions such as mailing, fax, typing, records management all fall under this category.

Business Intelligence Systems

They predict future sales patterns, summarize current costs and forecast revenues

Knowledge Management Systems

KMS analyze, organize and share knowledge with organization members for innovation and improved performance

Enterprise Collaboration System

ECS stress on team effort or collaboration across different functional teams by enabling collaborative effort and improving communication and sharing of data

Role of Inventory Information System

Optimum calculation of inventory costs

Your organization’s information system can accurately tell you the disparity between inventory costs and sales. With this information, you can set the price of items in conjunction with how much you paid to acquire them.

Maintaining accurate inventory levels

An information system can assist you in managing inventory levels by reports from manufacturing or purchasing, inventory, and sales. This will show you the movement of your inventory through the supply chain. You’ll know which are your best-selling and low-selling products and accordingly tweak your warehouse management to streamline picking, packing, and shipping processes. Since the information system consolidates data from all departments of the enterprise, you can strategize on sales and promotions for items sitting unsold for long. By providing detailed information about stock, information system facilitates greater inventory control,  accurate safety stock calculation, and reduces inventory shrinkage and warehouse costs.

Reporting Value of Inventory

The value of your inventory is not the same as the price on which it was bought.  It is the value on which it has the potential to be sold. An information system can calculate the possible sales value of your current inventory.


Information systems are important tools for managing and collating and analyzing large amounts of data to gain plausible results that help in making informed business decisions. In inventory management too, information systems play an important role as they brief managers about accurate inventory levels, warehouse management needs and help to increase the overall efficiency of the inventory management process.

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