Ch09 Transaction Processing and Enterprise Resource Planning Systems

Principles of Information Systems, Seventh Edition 2

• An organization’s TPS must support the routine, day-to-day activities that occur in the normal course of business and help a company add value to its products and services

• Identify the basic activities and business objectives common to all transaction processing systems

• Explain some key control and management issues associated with transaction processing systems

• Describe the inputs, processing, and outputs for the transaction processing systems associated with order processing, purchasing, and accounting business processes


• TPSs help multinational corporations form business links with their business partners, customers, and subsidiaries

• Identify the challenges that multinational corporations must face in planning, building, and operating their TPSs


• Implementation of an enterprise resource planning system enables a company to achieve numerous business benefits through the creation of a highly integrated set of systems

• Discuss the advantages and disadvantages associated with the implementation of an enterprise resource planning system


An Overview of Transaction Processing Systems

• A transaction processing system (TPS) provides data for other business processes

• Management information system/decision support system (MIS/DSS)

• Special-purpose information systems


Figure 9.1: TPS, MIS/DSS, and Special Information Systems in Perspective


An Overview of Transaction Processing Systems (continued)

• TPSs

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

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


Traditional Transaction Processing Methods and Objectives

• 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


Figure 9.2: Batch Versus Online Transaction Processing


Traditional Transaction Processing Methods and Objectives (continued)

• Online entry with delayed processing: transactions are entered into the computer system when they occur, but they are not processed immediately

• Organizations expect their TPSs to:

• Process data generated for and about transactions

• Maintain a high degree of accuracy and integrity

• Produce timely documents and reports


Traditional Transaction Processing Methods and Objectives (continued)

• Organizations expect their TPSs to (continued):

• Increase labor efficiency

• Help provide increased service

• Help build and maintain customer loyalty

• Achieve competitive advantage


Figure 9.3: Integration of a Firm’s TPSs


Transaction Processing Activities

• TPSs

• Capture and process data that describes fundamental business transactions

• 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


Figure 9.4: A Simplified Overview of a Transaction Processing System


Figure 9.5: Data Processing Activities Common to TPSs


Transaction Processing Activities (continued)

• Data collection

• Should be collected at source

• Should be recorded accurately, in a timely fashion

• Data editing

• Data correction


Transaction Processing Activities (continued)

• Data manipulation

• Data storage

• Document production and reports


Control and Management Issues

• Business continuity planning: identification of the business processes that must be restored first in the event of a disaster and specification of what actions should be taken and who should take them to restore operations

• Disaster recovery: actions that must be taken to restore computer operations and services in event of disaster


Transaction Processing System Audit

• Does the system meet the business need for which it was implemented?

• What procedures and controls have been established?

• Are these procedures and controls being used properly?

• Are the information systems and procedures producing accurate and honest reports?


Table 9.2: The Systems That Support Order Processing, Purchasing, and

Accounting Functions


Order Processing Systems

• Order entry

• Sales configuration

• Shipment planning

• Shipment execution


Order Processing Systems (continued)

• Inventory control

• Invoicing

• Customer relationship management

• Routing and scheduling


Figure 9.7: Order Processing Systems



• Order entry system: captures the basic data needed to process a customer order

• Sales configuration system: ensures that the products and services ordered are sufficient to accomplish the customer’s objectives and will work well together

• Shipment planning system: determines which open orders will be filled and from which location they will be shipped


Figure 9.8: Data Flow Diagram of an Order Entry System



• Shipment execution system: coordinates the outflow of all products from the organization, with the objective of delivering quality products on time to customers

• Inventory-control system: updates the computerized inventory records to reflect the exact quantity on hand of each stock-keeping unit



• An invoicing application looks up the full name and address of the customer, determines whether the customer has an adequate credit rating, automatically computes discounts, adds taxes and other charges, and prepares invoices and envelopes

• Customer relationship management (CRM) system: helps a company manage all aspects of customer encounters, including marketing and advertising, sales, customer service after the sale, and programs to retain loyal customers


Figure 9.12: Customer Relationship Management System



• Routing system: determines the best way to get products from one location to another

• Scheduling system: determines the best time to pick up or deliver goods and services


Purchasing Systems

• Purchasing transaction processing systems include:


• Purchase order processing

• Receiving

• Accounts payable


Figure 9.13: Purchasing Transaction Processing System


Purchasing Systems (continued)


• Purchase order processing system: helps purchasing departments complete their transactions quickly and efficiently


Purchasing Systems (continued)

• Receiving system: creates a record of expected receipts

• Accounts payable system: increases an organization’s control over purchasing, improves cash flow, increases profitability, and provides more effective management of current liabilities


Accounting Systems

• Budget

• Accounts receivable

• Payroll

• Asset management

• General ledger


Figure 9.16: Financial Systems


Accounting Systems (continued)

• Budget transaction processing system: automates many of the tasks required to amass budget data, distribute it to users, and consolidate the prepared budgets

• Accounts receivable system: manages the cash flow of the company by keeping track of the money owed the company on charges for goods sold and services performed


Figure 9.17: An Accounts Receivable Statement



• Payroll system prepares:

• Payroll check and stub

• Payroll register

• W-2 statements

• Asset management transaction processing system: controls investments in capital equipment and manages depreciation for maximum tax benefits



• General ledger system: designed to automate financial reporting and data entry


International Issues

• Issues that multinational corporations face in planning, building, and operating their TPSs

• Different languages and cultures

• Disparities in information system infrastructure

• Varying laws and customs rules

• Multiple currencies


Enterprise Resource Planning: An Overview

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

• Real-time monitoring of business functions

• 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

• Develop demand forecast

• Deduct demand forecast from inventory

• Determine what is needed for production

• Check inventory for needed raw materials


An Overview of Enterprise Resource Planning (continued)

• Steps in running a manufacturing organization using an ERP system (continued)

• Schedule production

• Assess need for additional production resources

• Financial forecasting


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

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

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

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


Summary (continued)

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

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


Summary (continued)

• Purchasing transaction processing systems include inventory control, purchase order processing, receiving, and accounts payable

• Accounting systems include 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

Education

Ch09 Transaction Processing and Enterprise Resource Planning Systems