Chapter 8 Transaction Processing, Electronic Commerce, and Enterprise Resource Planning Systems

ITEC 1010 Information and Organizations

TPS, MIS, DSS, and AI/ES

Hierarchy:
Information AI/ES DSS
Routine

Less

More

Less

More

MIS Data TPS More

Decision support

Input & output

Sophistication & complexity of processing & analysis

Less

More

Less

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Transactions
Transactions

Basic business operations such as customer orders, purchase orders, receipts, time cards, invoices, and payroll checks in an organization

Transaction processing systems (TPS)

Perform routine operations and serve as a foundation for other systems

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Batch vs. On-Line Transaction Processing

Two types of TPS: Batch processing

A system whereby business transactions are accumulated over a period of time and prepared for processing as a single unit or batch

On-line transaction processing (OLTP)

A system whereby each transaction is processed immediately, without the delay of accumulating transactions into a batch
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Batch Schematic

Data entry of accumulated transactions

Input (batched)

Output

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On-line Schematic

Terminal Terminal Terminal

Output
Terminal

Immediate processing of each transaction

Terminal Terminal

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Integration of TPSs

[ ]
Applications software People
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xn=
Schematic

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Objectives of TPS
Process data generated by and about transactions Maintain a high degree of accuracy Ensure data and information integrity and accuracy Produce timely documents and reports Increase labour efficiency Help provide increased and enhanced service Help build and maintain customer loyalty Achieve competitive advantage
ITEC 1010 Information and Organizations

Simplified Overview of a Transaction Processing System

Schematic
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Data entry & input Documents & reports

Documents: pick list cheques to vendors receiving notices paycheques Operational reports: finished product inventory status raw materials; packing materials; spare parts; inventory status

Processing

Internally generated transactions: shipped orders purchase orders employee time cards Externally generated transactions: customer orders vendor invoices customer payments

Database
Database update: customer orders inventory purchase orders customers suppliers Information and Organizations

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Data Processing Activities Common to TPSs

A transaction processing cycle

Data collection Data editing Data correction Data manipulation Data storage Document production
Schematic

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Original data Data collection Data edit Data manipulation Data storage Document production ITEC 1010 Information and Organizations

Data correction

Source Data Automation

Source data automation

The process of capturing data at its source with minimal manual effort Data are entered directly into the computer

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Point-of-Sale Transaction Processing System

Customers receipt UPC and quantity Inventory database Management information system Exception report

Point-of-sale UPC transaction Scanner Quantity, processing system Date, time UPC Price Item database

Item, quantity, date, time, price Purchases database

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Control and Management Issues

Business resumption planning

The process of anticipating and providing for disasters.

Disaster recovery

The implementation of the business resumption plan.

Transaction processing system audit

An examination of the TPS in an attempt to answer three basic questions

Does the system meet the business need? What procedures and controls have been established? Are the procedures and controls being properly used?

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Traditional TPS Order Processing

Order processing Processing an order from entry to delivery, including traditional accounting transactions

Schematic
ITEC 1010 Information and Organizations

Invoice Products Inventory status

Customer Customer order in person or via mail, phone, EDI, internet Order entry/ sales configuration Orders Planned shipments

Finished product inventory

Shipment planning Pick list Shipment execution

Routing Planned shipments & routes Scheduling

Shipped orders Invoicing

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Data Flow Diagram of an Order Entry System

Schematic
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D6 Inventory
Product numbers, inventory levels

D1 Products/prices
Products, price information 2. Verify Orders product numbers & stock on hand

D2 Customer payment history

Credit status Open orders

1. Collect order info

Orders

3. Authorize credit

D3 New orders

Rejected, partly filled orders Back orders Customer notification Back orders

4. Notify customer

D4 Back orders

Customer

Rejected orders

D5 Rejected orders ITEC 1010 Information and Organizations

Order Processing Support Systems Sales Configuration

Sales configuration

Ensures that products and services ordered are sufficient to accomplish customers objectives and will work well together

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Order Processing Support Systems Shipment Planning

Shipment planning

A system that determines which open orders will be filled and from which location they will be shipped E.g., (from Figure 8.9)
ITEM NUMBER 10 L1L16028 20 S8276 30 S8279 40 DESCRIPTION FASENTING TOOL STAPLE INCH STAPLE 1 INCH SHIPPING CHARGE 3 15 15 ORDERED EACH CASE CASE SHIPPED 3 15 12 3 BO

LOC 8

LINK 105

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Order Processing Support Systems Shipment Execution

Shipment execution

A system that coordinates the outflow of all products and goods from the organization, with the objective of delivering quality products on time to customers

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Order Processing Support Systems Inventory Control

Inventory control

A system that updates the computerized inventory records to reflect the exact quantity on hand of each stock keeping unit Status reports

Summarize all inventory items in stock, or shipped over a specified period of time

E.g., see Figure 8.10

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Order Processing Support Systems Invoicing

Invoicing

Generates customer invoices based on records received from the shipment execution TPS E.g., see Figure 8.11

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Order Processing Support Systems Customer Interaction System Customer interaction

A system that monitors and tracks each customer interaction with the company

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Customer

Request for proposal

Sale

Problem, idea, request for information

Other contacts

Customer interaction system Market research Product development

Sales Marketing

Quality control

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Order Processing Support Systems Routing and Scheduling

Routing

A system that determines the best way to get goods and products from one location to another

Scheduling

A system that determines the best time to deliver goods and services

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Purchasing System

Schematic
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Raw materials Packing materials Spare parts Inventory control Purchase order request Employees Inventory control status report Purchase order processing Purchase order Receiving Receiving notice Accounts payable Material Supplier

Purchase order

Invoice Cheque

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Purchasing System
Inventory control

Maintains stock of items such as raw materials, packing materials, spare parts, and supplies A system that helps purchasing department complete transactions quickly and efficiently A system that creates a record of expected and actual receipts Reconciles purchase orders with what is actually received A system that increases an organizations control over purchasing, improves cash flow increases profitability, and provides more effective management of current liabilities

Purchase order (P.O.) processing

Receiving

Accounts payable

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P.O. Example
(Click to view)

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Accounting System
Accounting systems Consist of

Budget Accounts receivable Accounts payable Payroll Asset management General ledger
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Accounts Payable Example

(Click to view)

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Financial Systems

Schematic
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Customer Payments Accounts receivable Amounts owed by customers Amounts paid by customers

Asset management Cost of assets Accounts payable Amounts owed by company Amounts paid by company

Payroll

Labour costs

General ledger Expense transactions Budget

Asset depreciation

Paycheques Time cards Customer

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Financial Systems Accounts Receivable

Accounts receivable

A system that manages the cash flow of the company by keeping track of the money owed the company on charges for goods sold and services performed

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Statement of Account Example

(Click to view)

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Financial Systems Accounts Receivable

Accounts receivable aging report

Tells managers what bills are overdue, either customer by customer or in a summary format

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Aging Report Example

(Click to view)

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Financial Systems - Payroll

Payroll

Generates payroll checks and stubs, as well as W-2 statements at the end of the year for tax purposes

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Financial Systems - Payroll

Payroll journal

Helps managers monitor total payroll costs for an organization and the impact of those costs on cash flow

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Financial Systems Asset Management

Asset management transaction processing system

A system that controls investments in capital equipment and manages depreciation for maximum tax benefits

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Financial Systems - General Ledger

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Electronic Commerce (E-commerce)

Business-to-business problems
Inadequate models Integrating with existing systems Improving relationships with suppliers, customers, distributors.

Consumer problems
Wait for images to download Security of credit information Figuring out the ordering process

Currently a small part of all commerce

ITEC 1010 Information and Organizations

Five Stage Model of E-Commerce

The stages consumers experience in the sales life cycle

Schematic
ITEC 1010 Information and Organizations

Buyer Electronic distribution

Traditional delivery

5. After sales service

1. Search and Identify

4. Product & service delivery

2. Selection & negotiation

3. Purchasing
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Buying Over the Internet

Prepare list of items needed

Log on to internet Review response to request for quotation

Access supplier s home page Fill out request for quotatio n form

Browse supplier s catalog

Input sent to suppliers order entry system

Place order

Pick items

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Forecasted Volume of E-Commerce

Mode Consumer Business 1997 $0.5 billion $8.0 billion 2000 $7 billion $66 billion

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Purchasing Products and Services Electronically

Establish credit with suppliers Secure E-commerce transactions Secure financial transaction (SFT) SET = secure electronic transaction CyberCash

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SET Discussion (1)

Short for Secure Electronic Transaction, a new standard that will enable secure credit card transactions on the Internet. SET has been endorsed by virtually all the major players in the electronic commerce arena, including Microsoft, Netscape, Visa, and Mastercard. By employing digital signatures, SET will enable merchants to verify that buyers are who they claim to be. And it will protect buyers by providing a mechanism for their credit card number to be transferred directly to the credit card issuer for verification and billing without
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SET Discussion (2)

the merchant being able to see the number. The first applications based on SET are expected appeared in 1998.

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Enterprise Resource Planning (ERP)

ERP

Real-time monitoring of business functions

Advantages

Eliminate costly, inflexible legacy systems Provide improved work processes Provide access to data for operational decision making Upgrading technology infrastrucutre

Disadvantages

Time consuming, difficult, expensive to implement Make radical changes in how a company operates Lack of vendor responsiveness in light of high demand

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ERP Examples
Software Vendor Avalon Software qad.inc Oracle SAP America Baan PeopleSoft J.D. Edwards
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Name of Product Avalon CIM MRG/PRO Oracle Manufacturing SAP R/3 Triton PeopleSoft World

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Example of an ERP System - SAP/R3

Clients in the SAP system Application servers in the SAP system Business application programming interfaces (BAPIs) Database server in the SAP systems Objects in the SAP system Repository Tables
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SAP Three-Tier Client/Server Architecture

Database server

Application servers

Client desktop computers

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Business Application Programming Interface (BAPI)

Business processes Standard results Standard request for data or processing

BAPI (public interface) Results consistent with current version of SAP software SAP software Request for data or processing consistent with current version of SAP software

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End of Chapter 8

Chapter 9
ITEC 1010 Information and Organizations