Module: 08 Information Systems - globaledulink.co.uk file150 1. Information What is information?...
Transcript of Module: 08 Information Systems - globaledulink.co.uk file150 1. Information What is information?...
E1 Organisational Management
Module: 08
Information Systems
150
1. Information
What is information?
Katy works on the till at UK supermarket, Tesco. For around 40% of
transactions she is offered a loyalty card to swipe. The card links each item
sold to an identity – that of the customer. After a day on the till, Katy, like
most of her colleagues has collected around 3 gigabytes of data. Each till at the store generates similar data. Were someone to hack that computer what
they would see would be of no value whatsoever. Just long lists of
numbers.
That computer, however, sends all its data to a company called Dunnhumby.
Dunnhumby is the data analyst that runs Tesco's loyalty card scheme. It
receives the data from every card swiped at every store. When it gets the
data from Tesco it puts the data through a number of processes to
analyse it. Dunnhumby can see, for example, that each ID number
corresponds to an age, a gender and a postcode, volunteered by the user
when signing up.
From this processed data, Dunnhumby produce information – something of
use to the business. For example, it can see that 60% of its premium price-
point sales at Hypermarket A come from a particular postcode, 10 miles
away from the store. It then gives this information back to Tesco.
Tesco can now use the information to form strategy. For example, it may
decide that it should open a small-format store directly in the postcode that
travels 10 miles for premium products and adjust its range towards the upper
end of the market. The information gave Tesco a competitive advantage.
Katy collected data. It had no value on its own. Only after it was processed by
Dunnhumby did the data become information. Information is data, plus
process and that information can be used to drive strategy.
Information is data, plus process and that information can be used in all kinds
of ways.
In other words:
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For example:
High quality information
Information produced, including financial information, can be seen to be of
high quality when it meets the following criteria. We will consider these in
relation to what would be needed for a financial report to directors for the last
quarter's results.
Accurate – correct e.g the report contains no errors.
Complete – includes all relevant data e.g. every departments' figures are
included, none are missing.
Cost beneficial – the benefits of producing the information outweigh the
costs e.g. the costs would be those of the finance department producing
relevant information while the benefits are good strategic decisions.
Understandable – readers are clear what is is producing e.g. the reported
information is clearly presented with standard financial terms and using
standard financial conventions.
Relevant – information is relevant to the users e.g. the financial report is
going to the board of directors and is about the company as a whole so it's
relevant to them. Had it been about a small part of the business, say a
detailed inventory report then it would not have been relevant.
Accessible – the information is readily found e.g. if the report is sent by
email to all recipients and is also available on their intranet for download it
would be easily accessible.
Timely – it is received on time and quickly. e.g. a financial report which is a year
old would not be useful!
Easy to use – it is clearly presented and usable by readers e.g. the report
presents information in graphs and tables to make it easy to use.
You'll notice the letters of those points spell out the word ACCURATE, so that
should be an easy one for you to remember!
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The role of information systems in organisations
We live in an information age. It's never been easier to collect data, process it
into information and share that information with multiple stakeholders.
Information is vital in modern organisations because it enables:
1. Competitive advantage
Information systems can identify trends in data. In particular, sales data
can give a business an insight into what customers are buying. Having this
insight will mean a company can tailor its products, marketing and pricing
accordingly, something a competitor may not be able to do.
For example, online retailer, Amazon use customer data to make
suggestions to customers of other products they might like to purchase, so if a
customer has previously purchased a book by a particular author they will pop
up a suggestion of another popular book by the same author. They use their
information to provide the customer with a better service while also
increasing their sales.
2. Effective decision making
Information systems that hold valuable data enable managers to make
valuable decisions. When organisations have access to up-to-date,
accurate and real-time information, decisions can be made quickly and
with confidence.
For example, imagine a sales manager has to decide whether to discontinue
a product, they will need to know how many units have been sold, how
profitable the product is, and if there is any relevant customer feedback.
Information is critical to making the best decision.
3. Undertaking day to day activities
Information systems can be used to support the day-to-day running of an
organisation. In many cases, tasks that used to take hours to do manually
are now done quickly and efficiently due to the implementation of
information systems.
For example, large retail stores have increased efficiency by using
information systems in checkouts. In many cases, as soon as a bar-code is
swiped, the product inventory is updated, and the product is automatically
re-ordered from the supplier.
4. Measuring performance
Informations systems can be used to produce cost estimates and
forecasts. These are then reviewed against actual results when looking at
business performance, allowing organisations to find the causes of problems
and take remedial action.
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For example, a forecast for the upcoming year may estimate that the
summer months are likely to produce little profit. In order to prepare the
business may run offers and promotions to ensure that potential sales
problems are eliminated. When reviewing the sales data later in the year they
find that sales were much higher than expected and decide to follow the
same marketing approach the following summer.
5. Communication
Information systems aid managers in particular because they can gather and
distribute information to employees quickly and efficiently. Information
systems are efficient platforms for sharing documents between organisations or individuals. This type of communication encourages collaboration and
team working between employees.
Costs
When a new IT system is produced these benefits must be weighed up
against the costs in a cost benefit analysis. Costs can include:
• Design and development
• Hardware
• Software
• Testing
• Training
• Staff costs
• Outsourced costs (e.g. external IT programmers)
• Ongoing costs (e.g. updates, ongoing training, maintenance).
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2. Levels of management, information and control
In organisations, there are different levels of management and these levels
will have different levels of control. Imagine you were the owner of an
international furniture company, would you leave important decisions about
the company's strategy to a store manager? Probably not! They have
different skills and abilities. Decisions about inventory levels, accepting
deliveries and stock management are their forte and as the owner you
probably would know little.
Organisations can be divided into three hierarchical levels: Strategic (senior
management), tactical (middle management) and operational
(supervisors and their staff). These organisational decision-making levels
can also be used to distinguish the organisational control levels.
Strategic control
This is the level of control operating at board level. It will largely consist of the
setting of the control environment as a whole. It will include:
• strategic planning determining the course the organisation will take
• procedures for board meetings.
• setting up and reviewing the organisational structure
• codes of conduct (e.g. ethics)
• setting performance measures for the company as a whole.
• risk assessment and management.
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Tactical control
This is control at the middle management level of the organisation.
Controls at tactical level include:
• budgets (e.g. cost budget for the department) and variances (reviewing differences between cost and actual to review reasons)
• applying central policies so standard procedure is followed
e.g. health and safety rules or recruitment procedures.
• supervising divisions and departments
• staff management
• setting business plans for the division.
Operational control
This occurs at the lower levels of the organisation. Operational controls
are designed to control structured and repetitive activities according to
pre-set rules. For example, a computerised stock control system, where
stock levels per component, reorder levels and reorder quantities are
calculated and operated according to predetermined and precise rules.
Controls at operational level include:
• Staff management
• Staff scheduling
• Standard procedures (e.g. as with the computerised stock system example).
The role of information in control at each level
Information plays a key part in control at each level.
We'll run through this section in a practical way using an example for each.
Run through each of these exercises generating your own ideas first and
then seeing our ideas to add to your own. You could, of course, just read our
solutions, but you'll get more benefit if you generate your own ideas first. We
will use a supermarket for our example
Example 1 - Strategic level – Managing director
Consider the information needed by the managing director of a supermarket chain
to help them set the strategy and run the business as a whole
Solution 1
• Information about competitors such as any new marketing campaigns
• Information about major suppliers such as pricing and new products
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• Economic forecasts to understand customer buying patterns
• Technological changes (recent and future) to stay on top of competitors
• Social trends such as a health food fad
• Political and Legal changes such as food labelling laws
• Company performance as a whole (Profits, Cashflows)
• Divisional performance to understand which divisions perform best
• Share price information.
Example 2 - Divisional level – e.g. Supermarket manager
Consider the information needed by a supermarket manager to help them to
manage the store they are running. They'll need to manage their staff, the
customers, the building and the overall store performance.
Solution 2
• Performance of store (profits, sales, cashflow, return on investment)
• Performance of each area (bakery, restaurant, frozen foods)
• Comparative information about local competitors
• Policies and procedures to be implemented (as dictated by head office)
• Problems or issues as they occur e.g. customer complaints, stock- outs, issues with the building.
Example 3 - Operational level – e.g. Bakery manager
Finally, let's consider the bakery manager. They run a small team of bakers
who are up early each morning to bake fresh bread and cakes for the store.
The bakery manager will need to ensure that the right quantities and quality of
produce is produced each day and manage their staff on a moment by
moment basis. But what information would they need?
Solution 3
• Demand for different products so that production schedules can be completed and the right ingredients ordered – previous sales levels
would be useful to identify demand
• Employee information (work schedules, skills)
• Standard procedures from head office e.g. recipe information, cooking times, cleaning procedures
• Supplier information in case additional supplies need to be ordered
• Stock levels so that a constant supply can be maintained
• Prices – as dictated by head-office, in competitor’s stores, past prices.
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3. Process Technology
Working in a large organisation without an information system would be like
trying to find a book in a library with no organised system: every time
someone needed information, it would be chaos!
It is vital then that information systems are systems designed to provide the right
information to the right people at the right time throughout the
organisation. They are hence crucial to the control of an organisation.
As the above diagram shows, there are many different types of information
systems, operating at different levels. Let's take a look at these and some
additional systems in detail:
Executive information systems (EIS)
Executive information systems (EIS) are systems which collate and provide
information to senior managers to enable them to make strategic
decisions. This will include information such as:
• Organisational performance e.g. sales figures
• Competitor performance, strategies and actions e.g. competitor's sales figures
• Broad environmental information e.g. political change
• Customer information e.g. customer emails
• Market information e.g. market share.
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Characteristics of EISs are:
• Summarised information provided so no need to rake through a large volume of information
• Can drill-down to more detailed information if needed
• Graphical displays for ease of use e.g. a pie chart of the market
share
• Connected to external databases to provide external information
• Flexible for different purposes, unlike standardised reports.
Management information systems (MIS)
Management information systems (MIS) provide management information
to support decisions made by senior and middle management.
MISs provide information in a regular standardised way, often summarising
transaction processing systems (see below) data at a higher level e.g.
profitability by division.
Features of MISs:
• Internally focused
• Produce simple summaries and comparisons of data (e.g. divisional sales, costs and profits)
• Standardised reports- done in the same way each month or quarter.
Decision support systems (DSS)
Decisions support systems (DSS) analyse data and report on it in a form
which helps the user to make decisions. DSSs do not make the decision
for the user, they simply provide information to help make the best decision.
Examples include:
• Spreadsheet models
• Simulations
• Price comparators for similar products from different suppliers.
They are distinguishable from MISs because they use detailed mathematical
or statistical models to analyse data. MISs simply summarise
transaction data (e.g. total profits).
They are used for semi-structured decisions where making the decision
can be helped by analysis of data, but where some judgement is required.
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Expert systems
Expert systems analyse and examine data about a situation and, using
this, provide an answer to a specific query. Examples include:
• Tax software
• Credit checking systems
• Fault diagnostic systems
Expert systems take the decision making out of the hands of the expert
and can allow lower level staff to make decisions which previously needed
to be made by an expert in the field. This can save the organisation money
and make decision making quicker. Tax software for instance allows a junior
member of staff to input client data and produce a tax return for a customer
without themselves being a tax expert.
Expert systems can only be used for structured decisions where there are
specific rules (e.g. tax rules) which can be applied to specific data (an
individual’s income and personal details).
Transaction processing systems (TPS)
Transaction processing systems (TPS) record and process the basic
transactions of the organisation. These systems produce information
specific to certain tasks. They are used in every area of the business.
Examples include:
• Finance – recording all income and expense items and producing a P&L and Balance sheet.
• Manufacturing – record purchases, stock, information on production processes, goods orders, deliveries made.
• Sales – recording and processing sales.
• Human resources – personnel records, payroll, training undertaken.
• Marketing – recording market research information (e.g. market research results).
TPSs only provide basic transactional based information (e.g. whether a
particular order has been met). The data is fed into MISs where the data is
analysed to produce broader, more useful information (e.g. total sales by
division).
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Knowledge Management
Maybe you've worked with someone who knows how to work the photocopier
but won't tell you how. She wants to be the gatekeeper to the photocopier, so she's guarding her knowledge. Knowledge is the information held within
people’s minds. It is used as part of many of the tasks undertaken in an
organisation, for instance:
a) The CEO has built up knowledge of how to manage organisations
through years of past experience.
b) A secretary knows how create excellent presentations on PowerPoint.
c) A researcher knows the likely result of a particular experiment
through study and experience.
d) A doctor diagnoses an illness, again through study and experience.
Of course, if that co-worker would share her photocopier knowledge everyone would end up doing a better and more efficient job. Knowledge
management is that process of capturing and storing knowledge for
access by relevant staff. For instance, the secretary outlines some key tips
on using PowerPoint to share with all staff. By sharing knowledge people will
be able to be more efficient, save time, and do a better job, making the
organisation more effective overall.
Knowledge management is particularly important for companies where
knowledge can be key to the organisation’s success, for instance in hi-tech
organisations where research and development are important, or consultants
where the success of a project is highly dependent on the knowledge of the
individuals in the team.
Knowledge work systems (KWS) help in the capture of knowledge and
the distribution of this knowledge around the organisation. A company
intranet where people share tips and techniques would be a simple KWS.
Knowledge workers
In a post-industrial age, work is often less about production or distribution of
goods and more about deploying expertise or specialised knowledge. This is
especially the case in hi-tech companies, where specialised knowledge is a
competitive advantage. But the rise of knowledge-based organisations has
implications for the knowledge workers who work within these companies
and the human resource managers supporting them:
Distributed or remote working
Knowledge work often does not require physical presence, so employees
may work remotely.
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Shorter contracts
Since knowledge skills are more readily transferable to other areas of the
business, it may not be necessary to define permanent roles but focus
instead on task-based objectives, for which short-term contracts can be
negotiated.
Development expectations
Knowledge workers may want to play a greater role in the definition of their
development objectives. For example, an expert programmer may be better
placed than management to foresee what future skills will be needed as
technology advances, and so will want to feed into the development process.
Knowledge management systems which facilitate the work of knowledge
workers include:
• Databases for sharing of information
• Internet and intranets for communication
• Groupware – team software which has features such as messaging, storage of files, team calendars and project management tools
• Internal networks – locally within a building (LAN – Local Area Network) or with other parts of the business (WAN – Wide Area Network).
Enterprise resource planning (ERP) systems
Enterprise resource planning (ERP) systems integrate internal and external
management information across an entire organisation, embracing
finance/accounting, manufacturing, sales and service, customer relationship
management, etc.
ERP systems automate this activity with an integrated software application. Their
purpose is to facilitate the flow of information between all business functions
inside the boundaries of the organisation and manage the connections to
outside stakeholders.
ERP systems can run on a variety of computer hardware and network
configurations, typically employing a database as a repository for
information. Examples include SAP and Oracle.
Benefits of ERPs
• Integrating the myriad processes by which businesses operate saves time and expense. Decisions can be made more quickly
and with fewer errors.
• Data becomes more visible across the organisation as it is in one
interlinked system and not in many each being held in each department.
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• Changes in one system, automatically transfer to others —e.g.
changes in inventory level automatically update inventory balances in
the finance system. This saves time and improves information
accuracy.
• Comprehensive enterprise view of information (no "islands of
information"). They make real–time information available to management anywhere, any time to make proper decisions.
• They protect sensitive data by consolidating multiple security systems into a single structure which can then be better managed.
• Improves the quality and efficiency of a business by having efficient inter-linked systems.
Computer integrated manufacturing (CIM)
CIM is the integration of computers into the manufacturing process so
that they have complete control over the process. This encompasses
computer aided manufacturing (CAM) and computer aided design (CAD).
Flexible manufacturing systems (FMS)
An FMS is a manufacturing system that the flexibility to allow for
change. This is good because it means that predicted and unpredicted
changes in the process or in demand can be dealt with efficiently.
Robotics
Robotics are a key part of many flexible manufacturing systems. Robotic
arms can be programmed in many different ways and so are not limited to
producing one single type of product.
Computer numerical control (CNC)
CNC Machining is a process used in the manufacturing sector that involves the use of computers to control machine tools e.g. lathes, mills and
grinders.
CNC allows computers to operate machinery which ensures consistency of
approach to manufacture precise designs over and over again to the same
specification while also saving labour costs.
Automated guided vehicles (AGV)
An automatic guided vehicle is an unmanned transportation system that
follows markers or wires in the floor, or uses vision, magnets, or lasers for
navigation. This saves cost on workers and also reduces human error.
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4. E-business
Introduction
Most organisations now use the internet to aid their work in some way. If
you have ever used the internet at work then you have participated in e-
business. If you have ever shopped online, you have also participated in e-
business. So, for a formal definition:
E-business (electronic business) is the use of the internet in business.
E-commerce (electronic commerce) is a subset of e-business related to the
buying and selling of products or services over the Internet.
E-business includes the following elements:
• Electronic funds transfer e.g. paying a supplier invoice.
• Internet marketing e.g. website, social media, emails.
• Automated process of transactions online e.g. customers buying a product online with no human interaction needed.
• Electronic data interchange (EDI) – the direct sharing of information between organisations e.g. for purchases or sales.
• Inventory management systems e.g. the automatic re-ordering of stock when it is needed.
• Automated data collection e.g. collecting customer emails when they make a purchase online.
Digital goods
Digital markets have allowed for the introduction of digital goods. For example,
downloaded music and books. Some companies may operate completely within
a digital market and not produce a physical product or service. e.g. makers of
mobile apps or online training companies.
Impact of e-business
E-business has allowed business transactions to become quicker and
cheaper and as such has been embraced by many organisations as a key
part of their competitive strategy. E-business is particularly important for
cost leaders, who often aim to automate the whole of their commerce and
data collection/management processes to keep costs low.
It also opens up a range of new marketing opportunities enabling
companies to reach new markets quickly and easily through a website, or
social media.
E-business has allowed global competition which can also be a threat as
new companies enter local markets and allows customers quick and easy
comparison of prices, reducing profit margins available on many products.
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5. Internet-based technologies
Wireless Technology
Wireless technology is an extremely useful technological development, and
not just because we can now read our emails on the go or watch a video of
cats on the bus!
Wireless technology has become more common over recent years as an
alternative to cable and fibre optic networks. With the developments of
networking, wireless technologies eliminate costly and untidy wires and
cables. Wireless technologies bring a number of benefits to networking in
business, such as:
Increased efficiency
Wireless technologies provide better data communications and faster
transfer of information.
For example, an employee out of the office on a sales call can at the same
time, check stock levels and prices.
Coverage
Wireless technologies are not restricted to areas that only cables and
wires can reach. Wireless routers can have far better coverage than cables
and routers which allow employees to work from almost anywhere in the
building. Employees can also communicate whilst on the move.
Costs
Wireless connections are generally easier and cheaper to install. The costs
of cables and wires to cover a large building will be extremely high. With
wireless technology, businesses will only require a number of routers to
ensure that the building is covered.
Hand-held technology
Wireless internet connections have led to the development of hand-held
technologies such as tablets and smartphones. More and more companies
are making their websites smartphone friendly and designing apps to
encourage frequent use.
The Internet
The internet is a global network of computers: severs or clients that
exchange information through copper wires, wireless connections and
other technologies. It's not limited by geography: it's available to anyone who
knows their Internet Protocol (IP) address and has an internet connection.
Businesses use the internet everyday, for communications, research, even
payments. Also sometimes for Facebook, when the boss isn't looking …
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However, despite the revolution it has spelled for information exchange, the
internet can be a high risk to businesses, and they must be very careful
about what they share over the internet, both for security and privacy
reasons.
Intranets
Unlike the global computer public-access network that forms the internet, an
intranet is a collection or group of private computer networks within an
organisation. In business, an intranet is a tool for communicating and
securely sharing information between work groups or people. An intranet is of
course similar to the internet, however information that is shared within an
intranet can only be accessed by authorised persons such as members or employees of the organisation. An intranet can provide many benefits to an
organisation, such as giving employees quick and easy access to the
resources that they need and improving communication.
The Cloud
The cloud, or cloud computing, specifically focuses on using internet for
the storage of data, making it accessible at any time. The cloud is most
commonly used for the backing-up of data in business. For example, work
may be completed on local computers, but a copy is backed up over the
internet to servers operated by a third party, such as Google or Amazon. The
technology was common long before the term “cloud” started to be used.
Businesses use the cloud because it has a number of benefits:
Costs
Using the cloud rather than physical file storage can save a significant
amount of money. Rather than everyone holding data on their own
computers it can be shared in single central location accessible to all. Cloud
computing applications can also run on all existing hardware infrastructure, so there is no need to upgrade computer systems.
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Disaster recovery
With Cloud computing, there is no need to plan for complex disaster
recovery. Files that are backed-up over the Internet can be easily accessed
and recovered, a lot quicker than traditional back-up recovery procedures.
Work from anywhere
If employees have internet access, they can access files that are stored over the cloud, meaning that they can work from anywhere. This encourages
flexibility and productivity in the work-force. One way that this is done is via
hot-desking.
Hot-desking
When an office has no assigned desks but 'work stations' where anyone can
plug in and work. This allows businesses to have more fluidity between
departments and means office space is not being wasted if employees
sometimes work at home.
Collaboration
As with working over an Intranet, the Cloud enables employees to work
together on tasks wherever they are by simply accessing the company's
cloud and updating files from there.
Remote working
Internet based technologies have enabled people to work away from a
single office location, working at clients or at home for instance. This is
remote working.
If people work in different locations and are part of a team then that team is
known as a virtual team.
Remote working and virtual team working can have the following benefits
for the organisation:
• Motivation of staff – being trusted, flexible working
• Lower overheads (as less office space required)
• Having staff from a wider catchment area i.e. those who do not live
within commuting distance of the office or people working together in a team from different offices.
On the other hand when people work from away from the office or work in
virtual teams they are harder to supervise and control. They may also feel
alone and without support, particularly when they are having difficulties
with some aspect of their work. There may also be a lack of team working
compared to a group being in the same office together and it may be hard
to have a consistent approach and culture.
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As a result, both remote working and virtual team working need to be carefully managed. According to David Skyrme to ensure a virtual team is
effective there should be:
• Regular and simple communication e.g. by email or
messaging, focusing on one topic per email or message
• Team support for each other
• Clear team goals and purpose
• Informal communications by email and messaging to replace what would have previously been informal verbal communication.
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6. Digitisation
Do you remember when looking something up meant checking a dictionary,
asking a friend or going to a library? Depending on your age some of you
probably do not! Now, of course, you can probably find the same information
online because it requires so little storage space and can be searched so
easily you can find exactly what you want much more quickly than you could
in the past.
Here's a formal definition of digitisation: the conversion of information
into a digital format so that information can be processed, stored
and transmitted.
Digitisation has brought a number of benefits to businesses, such as:
Improving business efficiency, quality and consistency
The introduction of digitisation programs enables data that was once on paper
to be quickly and efficiently accessed by a much wider group of people.
Everyone is also accessing the same, consistent information.
Improving response times and customer services
Having all customer and product information on a database allows finding
information about and for customers much easier.
Reducing costs
Digitisation programs can potentially reduce storage, management and
access costs. For example, once paper records have been digitised, they
can be destroyed; therefore decreasing the amount of storage space needed. Digitisation means that staff costs for filing, retrieving and
transporting records are reduced.