Chapter 8 Transaction Processing Electronic Commerce and Enterprise

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

TPS, MIS, DSS, and AI/ES q Hierarchy: Information AI/ES Less More Less Routine Decision support Input & output More Less More DSS MIS Data MIS TPS More Sophistication & complexity of processing & analysis Less

Transactions q Transactions… • Basic business operations such as customer orders, purchase orders, receipts, time cards, invoices, and payroll checks in an organization q Transaction processing systems (TPS) • Perform routine operations and serve as a foundation for other systems MIS

Batch vs. On-Line Transaction Processing q 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 MIS

Batch Schematic Data entry of accumulated transactions MIS Input (batched) Output

On-line Schematic Terminal Output Immediate processing of each transaction Terminal MIS

Integration of TPSs [ ] Applications software xn= People Schematic MIS

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Objectives of TPS § § § § MIS 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

Simplified Overview of a Transaction Processing System Schematic MIS

Data entry & input Processing Internally generated transactions: • shipped orders • purchase orders • employee time cards Externally generated transactions: MIS Documents & reports Documents: Database • pick list • cheques to vendors • receiving notices Database update: • paycheques • customer orders Operational reports: • inventory • finished product inventory status • customer orders • purchase orders • vendor invoices • customer payments • suppliers • raw materials; packing materials; spare parts; inventory status

Data Processing Activities Common to TPSs q A transaction processing cycle • Data collection • Data editing • Data correction • Data manipulation • Data storage • Document production Schematic MIS

Original data Data collection Data edit Data correction Data manipulation Data storage Document production MIS

Source Data Automation q Source data automation • The process of capturing data at its source with • MIS minimal manual effort Data are entered directly into the computer

Point-of-Sale Transaction Processing System Customer’s receipt Point-of-sale transaction Scanner Quantity, processing Date, system time UPC Price Item database MIS Inventory database UPC and quantity Item, quantity, date, time, price Purchases database Management information system Exception report

Control and Management Issues q Business resumption planning • The process of anticipating and providing for disasters. q Disaster recovery • The implementation of the business resumption plan. q 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? MIS

Traditional TPS – Order Processing q Order processing § Processing an order from entry to delivery, including traditional accounting transactions Schematic MIS

Invoice Customer Products Customer order in person or via mail, phone, EDI, internet Inventory status Order entry/ sales configuration Orders Finished product inventory Shipment planning Planned shipments Pick list Shipment execution Shipped orders Invoicing MIS Routing Planned shipments & routes Scheduling

Data Flow Diagram of an Order Entry System Schematic MIS

D 6 Inventory Product numbers, inventory levels 1. Collect order info D 1 Products/prices D 2 Customer payment history Products, price information 2. Verify product Orders numbers & stock on hand Orders Credit status 3. Authorize credit Open orders D 3 New orders Rejected, partly filled orders Back orders Customer notification 4. Notify customer Rejected orders D 5 Rejected orders MIS Back orders D 4 Back orders

Order Processing Support Systems Sales Configuration q Sales configuration • Ensures that products and services ordered are sufficient to accomplish customer’s objectives and will work well together MIS

Order Processing Support Systems Shipment Planning q 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) LOC LINK ITEM NUMBER DESCRIPTION 8 105 10 L 1 L 16028 20 S 8276 30 S 8279 40 FASENTING TOOL STAPLE ¾ INCH STAPLE 1 INCH SHIPPING CHARGE MIS 3 15 15 ORDERED SHIPPED BO EACH CASE 3 15 12 3

Order Processing Support Systems Shipment Execution q 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 MIS

Order Processing Support Systems Inventory Control q 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 MIS

Order Processing Support Systems Invoicing q Invoicing • Generates customer invoices based on records • MIS received from the shipment execution TPS E. g. , see Figure 8. 11

Order Processing Support Systems - Customer Interaction System q Customer interaction • A system that monitors and tracks each customer interaction with the company MIS

Customer Request for proposal Sale Problem, idea, request for information Other contacts Customer interaction system Market research Product development Sales Marketing MIS Quality control

Order Processing Support Systems Routing and Scheduling q Routing • A system that determines the best way to get goods and products from one location to another q Scheduling • A system that determines the best time to deliver goods and services MIS

Purchasing System Schematic MIS

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

Purchasing System q Inventory control • Maintains stock of items such as raw materials, packing materials, spare parts, and supplies q Purchase order (P. O. ) processing • A system that helps purchasing department complete transactions quickly and efficiently q Receiving • A system that creates a record of expected and actual receipts • Reconciles purchase orders with what is actually received q Accounts payable • A system that increases an organization’s control over • MIS purchasing, improves cash flow increases profitability, and provides more effective management of current liabilities

P. O. Example q (Click to view) MIS

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Accounting System q Accounting systems § Consist of… • Budget • Accounts receivable • Accounts payable • Payroll • Asset management • General ledger MIS

Accounts Payable Example q (Click to view) MIS

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Financial Systems Schematic MIS

Asset management Customer Cost of assets Payments Accounts payable Accounts receivable Amounts owed by customers Amounts paid by customers Payroll Labour costs Paycheques Time cards Customer MIS Amounts owed by company Amounts paid by company General ledger Expense transactions Budget Asset depreciation

Financial Systems Accounts Receivable q 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 MIS

‘Statement of Account’ Example q (Click to view) MIS

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Financial Systems – Accounts Receivable q Accounts receivable aging report • Tells managers what bills are overdue, either customer by customer or in a summary format MIS

‘Aging Report’ Example q (Click to view) MIS

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Financial Systems - Payroll q Payroll… • Generates payroll checks and stubs, as well as W-2 statements at the end of the year for tax purposes MIS

Financial Systems - Payroll q Payroll journal • Helps managers monitor total payroll costs for an organization and the impact of those costs on cash flow MIS

Financial Systems Asset Management q Asset management transaction processing system • A system that controls investments in capital equipment and manages depreciation for maximum tax benefits MIS

Financial Systems - General Ledger MIS

Electronic Commerce (E-commerce) q Business-to-business problems § Inadequate models § Integrating with existing systems § Improving relationships with suppliers, customers, distributors. q Consumer problems § Wait for images to download § Security of credit information § Figuring out the ordering process q Currently a small part of all commerce MIS

Five Stage Model of E-Commerce q The stages consumers experience in the sales life cycle Schematic MIS

Buyer Traditional delivery Electronic distribution 5. After sales service 1. Search and Identify 2. Selection & negotiation 4. Product & service delivery 3. Purchasing MIS

Buying Over the Internet Prepare list of items needed Input sent to supplier’s order entry system MIS Place order Log on to internet Review response to request for quotation Access supplier’s home page Browse supplier’s catalog Fill out request for quotation form Pick items

Forecasted Volume of E-Commerce MIS Mode 1997 2000 Consumer $0. 5 billion $7 billion Business $8. 0 billion $66 billion

Purchasing Products and Services Electronically q Establish credit with suppliers q Secure E-commerce transactions § Secure financial transaction (SFT) § SET = “secure electronic transaction” § Cyber. Cash MIS

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 MIS

SET ‘Discussion’ (2) the merchant being able to see the number. The first applications based on SET are expected appeared in 1998. MIS

Enterprise Resource Planning (ERP) q ERP • Real-time monitoring of business functions q Advantages • • Eliminate costly, inflexible legacy systems Provide improved work processes Provide access to data for operational decision making Upgrading technology infrastrucutre q Disadvantages • Time consuming, difficult, expensive to implement • Make radical changes in how a company operates • Lack of vendor responsiveness in light of high demand MIS

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

Example of an ERP System - SAP/R 3 § 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 MIS

SAP Three-Tier Client/Server Architecture Database server Application servers Client desktop computers MIS

Business Application Programming Interface (BAPI) Business processes Standard request for data or processing Standard results BAPI (public interface) Request for data or processing consistent with current version of SAP software Results consistent with current version of SAP software MIS

Thank You MIS