- 15 Marks
Question
Stuck Ltd manufactures industrial glues and solvents in a single large factory. Approximately 400 different inputs are used to produce the 35 specialist outputs, which range from ultra-strong glues used in aircraft manufacture to high-impact adhesives for construction sites.
Two years ago, with the company only just breaking even, the directors recognized the need for more information to control the business. To assist them with their strategic control, they established a Management Information System (MIS). This system is now operational but provides only the following limited information to the directors via their networked computer system:
- A summary business plan for this and the next two years. The plan includes details of expected future incomes and expenditure on existing product lines. It was produced by a new member of the accounting department without reference to past production data.
- Inventory balances on individual items of raw materials, finished goods, etc. This report is highly detailed and comprises 80% of the output from the MIS itself.
- A summary of changes in total demand for glues and solvents in the market over the last five years. This information is presented as a numerical summary in six different sections, with each section taking up one computer screen, so only one section can be viewed at a time.
Required:
(a) Comment on the weaknesses in the information currently being provided to the directors of the company. (9 Marks)
(b) Suggest how the information may be improved, with particular reference to other outputs the MIS might usefully provide to the directors. (6 Marks)
Answer
(a) Weaknesses in Information Provided to Directors
- Incomplete Information in Business Plan
The business plan was prepared by a new accounting department member without historical production data, leading to unreliable forecasts for future income and expenses due to the lack of reference to past data, ultimately resulting in inconsistent information. - Inaccuracy of Inventory Report
The inventory report comprises 80% of the MIS output, but the focus on detailed inventory balances lacks broader financial and operational summaries, affecting the decision-making quality due to excessive detail without context. - Lack of Integrated IT Infrastructure and Brevity of Summary
Information is presented in an overly detailed format with segmented sections, which leads to information overload and hinders management’s ability to quickly assess critical data. MIS should provide concise and relevant summaries that are easily accessible.
(b) Suggested Improvements for MIS
- Periodic Reports
Implement scheduled reports that summarize financial, operational, and inventory data at regular intervals, providing directors with a consistent view of business trends. - Triggered Reports
Incorporate reports that are generated in response to specific situations, such as significant changes in demand or inventory shortages, to allow proactive management of unforeseen events. - Demand Reports
Offer flexible, on-demand reporting that allows directors to query specific aspects of operations, facilitating quick responses to questions and concerns. - Exception Reporting Mechanism
Set up an exception reporting system where only abnormal data or deviations from expected results are flagged, enabling directors to focus on areas requiring immediate attention without sifting through standard data.
- Tags: Control Systems, Information Quality, MIS Evaluation, Strategic Decision-Making
- Level: Level 2
- Topic: Performance Measurement Systems
- Series: NOV 2015
- Uploader: Kwame Aikins