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

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TPS, MIS, DSS, and AI/ES


Hierarchy:
Information AI/ES DSS
Routine Decision support Input & output

Less

More

Less

More

MIS Data TPS More Less More

Sophistication & complexity of processing & analysis

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

xn=
Schematic

People

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Objectives of TPS

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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

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Simplified Overview of a Transaction Processing System

Schematic
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Data entry & input

Processing

Documents & reports


Documents: pick list

Internally generated transactions: shipped orders purchase orders employee time cards Externally generated transactions: customer orders vendor invoices customer payments ITEC 1010 Database update: customer orders inventory purchase orders customers suppliers

Database

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

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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 correction

Data manipulation
Data storage Document production

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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 transaction Scanner Quantity, processing Date, system time UPC UPC Price

Item, quantity, date, time, price


Purchases database

Item 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
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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 product Orders 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 Back orders

4. Notify customer

D4 Back orders

Customer

Customer notification

Rejected orders

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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

LOC 8 LINK 105

filled and from which location they will be shipped E.g., (from Figure 8.9)
DESCRIPTION FASENTING TOOL STAPLE INCH STAPLE 1 INCH SHIPPING CHARGE 3 15 15 ORDERED EACH CASE CASE SHIPPED 3 15 12 BO

ITEM NUMBER 10 L1L16028 20 S8276 30 S8279 40

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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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Purchase order request Employees

Raw materials Packing materials Spare parts Inventory control Inventory control status report

Purchase order processing


Purchase order Receiving

Purchase order

Material

Supplier

Receiving notice Accounts payable

Invoice

Cheque

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Purchasing System
Inventory control
Maintains stock of items such as raw materials, packing
materials, spare parts, and supplies

Purchase order (P.O.) processing


transactions quickly and efficiently

A system that helps purchasing department complete 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

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

Asset management Cost of assets Accounts payable

Payments Accounts receivable Amounts owed by customers Amounts paid by customers

Amounts owed by company Amounts paid by company

Payroll

Labour costs

General ledger Expense transactions

Asset depreciation

Paycheques Time cards Customer

Budget

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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
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Five Stage Model of E-Commerce


The stages consumers experience in the sales life cycle

Schematic
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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 Access suppliers home page Fill out request for quotation form Browse suppliers catalog

Log on to internet

Input sent to suppliers order entry system

Place order

Review response to request for quotation

Pick items

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Forecasted Volume of E-Commerce


Mode Consumer 1997 $0.5 billion 2000 $7 billion

Business

$8.0 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
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