Principles of Information Systems Seventh Edition An organizations

Principles of Information Systems, Seventh Edition

• An organization’s TPS must support the routine, day-today 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 Principles of Information Systems, Seventh Edition 2

• 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 Principles of Information Systems, Seventh Edition 3

• 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 Principles of Information Systems, Seventh Edition 4

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 Principles of Information Systems, Seventh Edition 5

Figure 9. 1: TPS, MIS/DSS, and Special Information Systems in Perspective Principles of Information Systems, Seventh Edition 6

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 Principles of Information Systems, Seventh Edition 7

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 Principles of Information Systems, Seventh Edition 8

Figure 9. 2: Batch Versus Online Transaction Processing Principles of Information Systems, Seventh Edition 9

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 Principles of Information Systems, Seventh Edition 10

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 Principles of Information Systems, Seventh Edition 11

Figure 9. 3: Integration of a Firm’s TPSs Principles of Information Systems, Seventh Edition 12

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 Principles of Information Systems, Seventh Edition 13

Figure 9. 4: A Simplified Overview of a Transaction Processing System Principles of Information Systems, Seventh Edition 14

Figure 9. 5: Data Processing Activities Common to TPSs Principles of Information Systems, Seventh Edition 15

Transaction Processing Activities (continued) • Data collection • Should be collected at source • Should be recorded accurately, in a timely fashion • Data editing • Data correction Principles of Information Systems, Seventh Edition 16

Transaction Processing Activities (continued) • Data manipulation • Data storage • Document production and reports Principles of Information Systems, Seventh Edition 17

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 Principles of Information Systems, Seventh Edition 18

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? Principles of Information Systems, Seventh Edition 19

Table 9. 2: The Systems That Support Order Processing, Purchasing, and Accounting Functions Principles of Information Systems, Seventh Edition 20

Order Processing Systems • Order entry • Sales configuration • Shipment planning • Shipment execution Principles of Information Systems, Seventh Edition 21

Order Processing Systems (continued) • Inventory control • Invoicing • Customer relationship management • Routing and scheduling Principles of Information Systems, Seventh Edition 22

Figure 9. 7: Order Processing Systems Principles of Information Systems, Seventh Edition 23

Order Processing Systems (continued) • 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 Principles of Information Systems, Seventh Edition 24

Figure 9. 8: Data Flow Diagram of an Order Entry System Principles of Information Systems, Seventh Edition 25

Order Processing Systems (continued) • 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 Principles of Information Systems, Seventh Edition 26

Order Processing Systems (continued) • 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 Principles of Information Systems, Seventh Edition 27

Figure 9. 12: Customer Relationship Management System Principles of Information Systems, Seventh Edition 28

Order Processing Systems (continued) • 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 Principles of Information Systems, Seventh Edition 29

Purchasing Systems • Purchasing transaction processing systems include: • Inventory control • Purchase order processing • Receiving • Accounts payable Principles of Information Systems, Seventh Edition 30

Figure 9. 13: Purchasing Transaction Processing System Principles of Information Systems, Seventh Edition 31

Purchasing Systems (continued) • Inventory control • Purchase order processing system: helps purchasing departments complete their transactions quickly and efficiently Principles of Information Systems, Seventh Edition 32

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 Principles of Information Systems, Seventh Edition 33

Accounting Systems • Budget • Accounts receivable • Payroll • Asset management • General ledger Principles of Information Systems, Seventh Edition 34

Figure 9. 16: Financial Systems Principles of Information Systems, Seventh Edition 35

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 Principles of Information Systems, Seventh Edition 36

Figure 9. 17: An Accounts Receivable Statement Principles of Information Systems, Seventh Edition 37

Accounting Systems (continued) • 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 Principles of Information Systems, Seventh Edition 38

Accounting Systems (continued) • General ledger system: designed to automate financial reporting and data entry Principles of Information Systems, Seventh Edition 39

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 Principles of Information Systems, Seventh Edition 40

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 Principles of Information Systems, Seventh Edition 41

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 Principles of Information Systems, Seventh Edition 42

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 Principles of Information Systems, Seventh Edition 43

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 Principles of Information Systems, Seventh Edition 44

Advantages and Disadvantages of ERP (continued) • Difficulty implementing change • Difficulty integrating with other systems • Risks in using one vendor • Risk of implementation failure Principles of Information Systems, Seventh Edition 45

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 Principles of Information Systems, Seventh Edition 46

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 Principles of Information Systems, Seventh Edition 47

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 Principles of Information Systems, Seventh Edition 48