Main Difference Between MIS and ERP: advantages and disadvantages they bring

It takes special attention and consistency for you, as an entrepreneur, to succeed and benefit from all business processes. Without the right software, it is difficult, if not impossible, to achieve a high level of control over your business. At some point, you will need a powerful system to manage all of your processes. But will traditional management systems be as successful as those being developed these days?

It probably won't come as a surprise to you if we tell you that more than 80% of companies are abandoning outdated marketing, HR and financial management systems in favor of more cutting-edge solutions such as MIS and ERP.

Both of these tools are designed to make data management more efficient and simplify decision-making for businesses. Despite the obvious similarities, there is a difference between MIS and ERP. To see this difference, you must first familiarize yourself with the features of each system individually. Our current article is a comparison between MIS and ERP. Let's go over it to help you decide which of these systems best meets your needs and will benefit you the most.

What Is MIS (Management Information System)?

MIS stands for Management Information System and is a centralized database that stores and processes information about a company, namely information about its finances, operations, workforce and work processes within the company.

Why do you need MIS? MIS allows you to increase revenues and improve business efficiency. The decision to implement MIS is made directly by senior management or technology leaders.

The main role of MIS is to collect data from various departments of the company, generate reports based on it and provide information support to the business. When properly implemented, a Management Information System can double the efficiency of management processes across an organization.

Core Functions of MIS

Information collection, processing and storage

MIS functionality focuses on gathering information from a variety of sources, such as e-commerce web resources, customer reports, customer touchpoints, social media and other information entry points, to help optimize workflows. MIS has it all - customer communication, accounting, product output, production dynamics, sales and marketing campaign data, and more. All that data wouldn't make much sense if it wasn't structured and segmented. That's what MIS does - it converts information into a convenient and meaningful format, which is then presented in the form of reports, graphs, charts, tables, audio or video messages, images, etc., and then the final information is passed on to the appropriate people or departments.

Business process forecasting and planning

MIS uses archive data and statistics, compares them and forecasts business processes. The next step is more detailed planning, including production plans, procurement, etc., which is based on the results of forecasts and reports.

Monitoring and benchmarking

MIS makes sure that the current performance and production results are in line with forecasts and plans.

MIS:

• Necessary for fast and efficient exchange of information between sales, accounting and marketing departments;
• Can adapt to the needs and peculiarities of any business;
• Useful for every company that needs to digitize information and streamline an ever-growing volume of data;
• Necessary in any area with the need to organize and/or speed up data flow;
• Widely used in areas such as finance, manufacturing, marketing, IT, etc.

MIS is often used in the restaurant business where it can be applied to three dramatically different levels of control:

1. Strategic level of control: Restaurant managers plan goals and objectives, create a budget to achieve them, look for target markets, and so on.

2. Managerial level of control: Customer feedback is taken into account, menus are created based on order statistics, the path taken by the order in different situations, such as from "ordered" to "canceled" status, is analyzed and taken into account to improve customer interaction and menus.

3. Operational level of control: The system collects data from all participants in the process who gain access to the system through gadgets such as terminals. In the restaurant business, the system collects data from waiters, chefs and administrators and consolidates all this information into a single system, greatly simplifying and speeding up processes.

Thus, the application of MIS is possible at three levels of management in the company:

1. Planning the budget and marketing strategy;

2. Management of departments and staff, as well as product control;

3. Collecting data on the performance of lower-level managers and the ability to optimize these processes, increasing the productivity of employees and the entire process.

It turns out that MIS can be used by users of different levels of responsibility - from top management to employees.

Pros and Cons of MIS

Systems such as MIS have their pros and cons because it is impossible to satisfy every user's needs and requirements - while one system feature seems to be a lifesaver, another complicates an already well-established process. But let's look at everything one by one.

Pros of MIS

A single database. Employees at all levels have direct access to the database so that they can use it at any time to perform their daily tasks and improve their performance. Moreover, employees can simplify the data collection process by using special templates, questionnaires or information collection forms.

Prioritizing tasks. Storing data in a single system simplifies the management of tasks and their prioritization - employees do not have to spend time on data processing and analysis to prioritize each task individually. It's the system that does it all, not the employees.

Simplified decision-making process. The system is equipped with tools and mechanisms designed to analyze incoming data, compare it and offer results based solely on real data.

Control and management of employee performance. MIS provides information on what tasks are done by employees, what decisions they make, how much time it takes and how effective those decisions are.

Saving and reducing manual work. Instead of processing data manually, employees turn to the virtual repository of information, which saves a lot of time on data processing. In addition, there is no need to spend money on paper and other office supplies to maintain records.

Financial insights. Senior management can request project feasibility data anytime they want and get an overall picture of the financial success of the business.

Enhancing your market position. With MIS, you can process customer requests faster and better, which, on one hand, increases customer satisfaction and helps with customer retention, and on the other hand, frees employees from routine manual work and empowers them with more time and energy for other more business-critical tasks.

All these clarify the ability of MIS to contribute to the overall enterprise efficiency. But what about the drawbacks? Are there any?

Cons of MIS

There are certain nuances that a potential buyer of such a system should be aware of:

High cost. Usually, systems with such broad functionality are expensive for both off-the-shelf and custom-designed solutions. Because of the high cost, MIS is usually chosen by large enterprises that can afford such a software solution.

Functionality issues. An off-the-shelf solution may lack critical features or conversely, the functionality may be redundant. To customize the system to meet your business needs, you will have to hire highly skilled and expensive software developers.

You need to train your employees on how to use MIS. Training your employees to work with MIS is time-consuming and expensive, but on the other hand, working with the system without specially trained staff is impossible.

Compatibility issues. Your business must already have established and standardized business processes and methods for collecting, analyzing and distributing data before you can use and benefit from MIS.

What Is ERP (Enterprise Resource Planning)?

To begin with, we need to know what is behind this acronym. Enterprise Resource Planning means an enterprise resource management system. It is a remote-access software for employees to plan future activities using existing and projected resources. It may even be called an operating system that has data about the company's resources and helps manage processes. Such systems can provide real-time reporting and allow the free exchange of information.

As a rule, ERP is part of a larger information management system, MIS, whose purpose is to automate and digitize routine tasks. Because of its functionality and convenience, ERP is often preferred over MIS, since ERP is designed for more highly specialized tasks and allows many management subsystems to be integrated into one holistic system at once.

ERP software can integrate all those processes that are important for managing a company: marketing, sales, purchasing, forecasting and planning, finance, human resources, etc.

Facts to consider:

• ERP facilitates interaction between the various processes and departments of the company due to its modular nature.
• Without a single ERP, every department in the company would have a separate system tailored to the tasks and goals of that particular department.
• With ERP, each department still has its separate system, but now they are all integrated, and each system is directly accessible through a single application with a shared interface.
• With ERP, it's easier for all employees to communicate and share information because that information is now available to those who can use it effectively.

Despite all the benefits of ERP, without proper implementation and use of the system, it can be inefficient and the company may experience cost overruns.

Roles, Goals, and Functions of ERP

When you need ERP:

• Business expansion;
• Cost reduction;
• Revenue growth;
• Greater enterprise efficiency.

However, each business benefits from ERP differently, depending on the purpose of using the system.

But what is certain is that the roles of ERP boil down to the following:

• Synchronize the work of departments with interrelated processes and thereby achieve greater results and greater efficiency;
• Provide clear and complete reporting received through ERP, allow adequate planning, forecasting, budgeting and more targeted actions;
• Enables employees to team up and drive business growth while remaining motivated and productive.

The core functions of ERP:

• Accounting. With the ERP system you can do accounting, namely: collect data, manage receivables and payables and tax payments, calculate wages according to working hours, etc. For these operations, specially designed tools and technologies are used, which are developed separately for each industry.
• Business intelligence. A single database of business criteria is formed; this data is analyzed, stored and used to make more informed and effective managerial business decisions.
• Production process. The system provides control over all stages of the production process - from forecasting and planning to budgeting and purchasing.
• Well-established communication. The system provides fast communication between all participants in the process since there is a unified and standardized database and quick access to the latest information on the current working issue.

ERP covers such tasks and areas of application:

• Finance: accounting, payables and receivables, payments, fees, cash management.
• HR: recruitment, training, payroll, benefit, retirement, management.
• Sales: pricing, sales analysis, order execution, communication process, reporting, commissioning.
• Production: bill of materials, equipment, operational process management, product life cycle management, product quality control.
• Supply chain: planning, procurements, warehousing, claims processing, etc.

Advantages and Disadvantages of ERP

Advantages and disadvantages of ERP can be identified based on user feedback.

Advantages of ERP

Simplified reporting process. With built-in templates, ERP can be viewed as a unified reporting system. Employees can also create customized report templates, and reporting data is collected automatically.

Enhanced data security. The system itself ensures that data is thoroughly backed up and if necessary, quickly restored. ERP also minimizes vulnerabilities through controlled access levels and centralized data storage.

Increased staff productivity. By minimizing much of the manual work, employees have more time to focus on higher priority tasks and thereby increase their productivity.

Business efficiency through optimized internal processes. Employees gain direct and fast access to business-critical information which speeds up decision-making, as well as the processing of orders, requests and other processes necessary so that business runs smoothly.

Scalability. When a company expands or new areas or departments are added, the system can adapt to incoming requirements and scale accordingly.

Areas where ERP efficiency growth is more than 50%:

• Operational efficiency;
• Reporting and visibility;
• Growth and competition;
• Technology upgrades.

Disadvantages of ERP

High cost. Most of these systems come with a paid subscription, which means that if you don't pay for the subscription, users will lose access to all the features, even the most minimal ones, leading to problems. It makes sense to develop your custom ERP, doesn't it?

Customization costs. A typical ERP may not fully meet the needs of the business, and then the company has to resort to customizing the system, which is not always cheap.

Difficulties in use. It requires a trained person to set it up and start using it, which entails an additional expense item.

Strong data protection is required. Since the data will be in cloud storage, this automatically increases the risk of hacking, theft and damage. You need to ensure that your data is secured.

Powerful hardware is needed for the software to work properly. No matter how powerful a system is, it can't function fully and properly without reliable servers and storage software.

Dependence on the power supply. All business and system operations can stop or go haywire if there are power problems.

Despite the high cost of ERP in operation, the benefits of using the system are far greater and more compelling. Especially when you consider ERP development from scratch.

Key Takeaways

To sum up, the main difference between MIS and ERP is that the former is the name of a certain class of information systems while the latter is a separate example of the former, its special case.

MIS deals with reports, it is a process of collecting, storing and processing data, numbers, any information, whereas ERP is a system aimed at automating business processes and managing company resources, with a function of forecasting future company activities.

MIS is reporting, ERP is business process automation.

MIS:

• Reporting
• Information management
• Data processing and storage

ERP:

• Information analysis
• Planning and automation
• Forecasting business development decisions

Which is better to use - MIS or ERP? Since ERP is a kind of MIS subspecies and is focused on more specialized tasks, you should start with an analysis of all your tasks to be done with the system you choose.

Bottom Line

Without ERP and MIS, a company's departments are isolated from one another, making the company's activities fragmented and the results and future unpredictable and little measurable. Conversely, when used correctly, these systems can consolidate a company's resources and capabilities while saving money and time.

If you are thinking in favor of ERP, you should know that it allows you to unite different departments within one organization and avoid using incompatible and expensive technologies. In ERP, each department can access the entire system, using only that part of the system - the module - which is designed to handle the tasks of that particular department.

In turn, the benefits of MIS can be used by the organization at every stage: for planning budgets, prioritizing markets, goals and general policies of the organization; for collecting and processing workflow data from various departments and employees, for collecting customer feedback and all other nuances that may ultimately affect the quality of service or product.

To get the most out of an MIS or ERP, an organization must be able to properly integrate these systems with its business processes. Now you know exactly what each system is for and how they are useful to your business. All that's left to do is choose which system to develop and how to properly implement it.

We at DDI Development can help you with these issues, as we have relevant experience in ERP development, and our team is ready to bring best practices to your project. Need more details? Let’s get in touch.