fundamentals of information systems, third edition1 an overview of transaction processing systems...

Fundamentals of Information Systems, Third Edition 1

An Overview of Transaction Processing Systems

• Every organization has transaction processing systems (TPSs), which process the detailed data necessary to update fundamental business operations of the organization.

• Automated TPSs consist of hardware, software, procedures, telecommunications, databases, and people. These components are organized to support the basic TPS processes of data collection, data editing, data correction, data manipulation, data storage, and document production.


An overview of Transaction processingsystems

• Transaction processing was one of the first business processes to be computerized and without information systems, recording and processing business transactions would consume huge amounts of an organization’s resources. A TPS provides employees involved in other business areas with data to help them achieve their goals. TPS systems are often integrated under the umbrella of an enterprise resource planning (ERP) system.


An Overview of Transaction Processing Systems

• Provide data for other business processes:– Management information system/decision support

system (MIS/DSS)– Special-purpose information systems

• Process the detailed data necessary to update records about the fundamental business operations

• Include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger.


An Overview of Transaction Processing Systems (continued)

Figure 5.6: TPS, MIS/DSS, and Special Information Systems in Perspective


Traditional Transaction Processing Methods and Objectives

Transaction processing can be done in the following ways

• Batch processing system: method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch

• Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch


Traditional Transaction Processing Methods and Objectives (continued)

Figure 5.7: Batch Versus Online Transaction Processing


Transaction Processing Activities

• All TPSs perform a common set of basic data-processing activities

• TPSs Capture and process data that describes fundamental business transactionsThis data is used to - Update databases - Produce a variety of reports

• Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production


Transaction Processing Activities (continued)

Figure 5.8: Data Processing Activities Common to TPSs



• Data collection is the process of capturing and gathering all data necessary to complete transactions. Data collection begins with a transaction and results in the origination of data that is input to the transaction processing system.– Should be collected at source– Should be recorded accurately, in a timely fashion– Source data automation

• Data editing is the process of checking data for validity and completeness to detect any problems.


Data Correction

• If invalid data is found during data editing, the system should provide error messages that alert those responsible for the data editing function. Error messages must specify what problem is occurring so that corrections can be made. A data correction involves reentering miskeyed or misscanned data that was found during data editing.



• Data manipulation: is the process of performing calculations and other data transformations related to business transactions.

• Data manipulation can include sorting data, performing calculation,….

• Data storage: is the process of updating one or more databases with new transactions. Once the databases have been updated, this data can be further processed and manipulated by other systems so that it is available for management decision making.


Document production and reports

• is the process of generating output records and reports. These documents may be hard-copy paper reports or displays on computer screens, which are sometimes referred to as soft copy.

• Paychecks are example of hard copy documents produced by a payroll TPS.


Basic TPS Applications

Table 5.4: Systems That Support Order Processing


Order Processing Systems Order processing systems capture the basic data

needed for a customer to place an order and comprise the following subsystems:

• Order entry

• Sales configuration

• Shipment planning

• Shipment execution


Order Processing Systems (continued)

• Inventory control

• Invoicing and billing

• Customer relationship management

• Routing and scheduling

the business processes supported by these systems are critical to the operation of the enterprise “lifeblood of the organization”


Order Processing Systems (continued)

Figure 5.10: Order Processing Systems


Purchasing and Accounting Systems

• Purchasing transaction processing systems include:– Inventory control (raw materials, packing materials,

spare parts, and supplies)– Purchase-order processing– Receiving– Accounts payable

This set of systems enables an organization to plan, manage, track and pay for its purchases of raw materials, parts, and services.


Purchasing and Accounting Systems (continued)

• Accounting transaction processing systems include:– Budget– Accounts receivable– Payroll– Asset management– General ledger

This set of systems enables an organization to plan, manage, track and control its cash flow and revenue.


Purchasing and Accounting Systems (continued)

Figure 5.11: Integration of a Firm’s TPSs


Enterprise Resource Planning

• Enterprise resource planning (ERP) software is a set of integrated programs that manages a company’s vital business operations. Although the scope of an ERP system may vary from vendor to vendor, most provide integrated software to support manufacturing and finance. In addition to these core business processes, some ERP systems are capable of supporting additional business functions, such as human resources, sales, and distribution.


Enterprise Resource Planning: An Overview of Enterprise Resource

Planning

• Enterprise resource planning (ERP) systems are used in large, midsized, and small companies

• The key to ERO is Real-time monitoring of business functions

• Permits Timely analysis of key issues, such as quality, availability, customer satisfaction, performance, and profitability


An Overview of Enterprise Resource Planning (continued)

• Steps in running a manufacturing organization using an ERP system:1. Develop demand forecast: preparation of a long

term demand forecast (up to 18 months in advance). Attempts to predict the weekly amount of each product to be purchased over this time period.


Steps in running a manufacturing organization using an ERP system:

(continued)

2. Deduct demand forecast from inventory:

As the forecasted demand is deducted from existing inventory to project future inventory levels, the system will display points at which additional finished products need to be produced.



(continued)

3. Determine what is needed for production

A bill of materials for each item to be produced is used to translate finished product requirements into detailed lists of requirements for raw materials and packaging materials, which will be required to make and ship each finished product item.



4. Check inventory for needed raw materials

the forecasted needs for raw materials and packaging materials are subtracted from the existing inventory of these items. The system displays purchases of additional items required to meet production needs.


Steps in running a manufacturing organization using an ERP system

(continued):5. Schedule production the ERP production planning module uses the

demand forecast and finished product inventory data to determine the week-by-week production schedules.

6. Assess need for additional production resources the production schedule may reveal the need to build

additional manufacturing capacity, hire additional workers. These new requirements can be input into the purchasing system and human resource modules of the ERP system and be used by managers in that area to develop future plans.


Steps in running a manufacturing organization using an ERP system

(continued):

7. Financial forecasting

All the generated data can be fed into the financial module of the ERP system to prepare a profit and loss forecast statement to assess the firm’s future profitability. This profit forecast in turn can be used to help establish new budget limits for the upcoming year.


Advantages and Disadvantages of ERP

• Elimination of costly, inflexible legacy systems

• Improvement of work processes

• Increase in access to data for operational decision making

• Upgrade of technology infrastructure

• Expense and time in implementation


Advantages and Disadvantages of ERP (continued)

• Difficulty implementing change

• Difficulty integrating with other systems

• Risks in using one vendor

• Risk of implementation failure


Summary

• In business-to-consumer (B2C) e-commerce, customers deal directly with the organization

• In business-to-business (B2B) e-commerce, the participants are organizations

• In consumer-to-consumer (C2C) e-commerce, the participants are individuals

• Supply chain management is composed of demand planning, supply planning, and demand fulfillment

• Mobile commerce (m-commerce) uses wireless devices to place orders and conduct business


Summary (continued)

• Transaction processing systems (TPSs) process the detailed data necessary to update records about the fundamental business operations

• Transaction processing cycle: data collection, data editing, data correction, data manipulation, data storage, and document production

• Order processing TPSs: order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer relationship management, and routing and scheduling


Summary (continued)

• Purchasing TPSs: inventory control, purchase-order processing, receiving, and accounts payable

• Accounting TPSs: budget, accounts receivable, payroll, asset management, and general ledger

• Enterprise resource planning (ERP) systems permit timely analysis of key issues, such as quality, availability, customer satisfaction, performance, and profitability

fundamentals of information systems, third edition1 an overview of transaction processing systems...

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