ITEC 1010 Information and Organizations Chapter 8 Transaction Processing, Electronic Commerce, and Enterprise Resource Planning Systems.

ITEC 1010 Information and Organizations

Chapter 8

Transaction Processing, Electronic Commerce, and Enterprise Resource Planning Systems


TPS, MIS, DSS, and AI/ES

Hierarchy:

AI/ES

DSS

MIS

TPS

Information

Data

Less More Less More

More MoreLess Less

RoutineDecisionsupport

Input &output

Sophistication& complexity of

processing & analysis


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


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


Batch Schematic

Data entryof accumulated

transactions

Input(batched)

Output


On-line Schematic

Output

Terminal

Terminal

Terminal

Terminal

Terminal

Terminal

Immediateprocessingof eachtransaction


Integration of TPSs

Applicationssoftware

People

Schematic

[ ]x n =



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


Simplified Overview of aTransaction Processing System

Schematic


Data entry & input

ProcessingDocuments& reports

Database

Internally generatedtransactions:

• shipped orders

• purchase orders

• employee time cards

Externally generated transactions:

• customer orders

• vendor invoices

• customer payments

Internally generatedtransactions:

• shipped orders

• purchase orders

• employee time cards

Externally generated transactions:

• customer orders

• vendor invoices

• customer payments

Database update:

• customer orders

• inventory

• purchase orders

• customers

• suppliers

Database update:

• customer orders

• inventory

• purchase orders

• customers

• suppliers

Documents:

• pick list

• cheques to vendors

• receiving notices

• paycheques

Operational reports:

• finished product inventory status

• raw materials; packing materials; spare parts; inventory status

Documents:

• pick list

• cheques to vendors

• receiving notices

• paycheques

Operational reports:

• finished product inventory status

• raw materials; packing materials; spare parts; inventory status


Data Processing Activities Common to TPSs

A transaction processing cycle• Data collection

• Data editing

• Data correction

• Data manipulation

• Data storage

• Document production

Schematic


Datacollection

Dataedit

Datamanipulation

Datastorage

Documentproduction

Datacorrection

Original data


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


Point-of-Sale Transaction Processing System

Customer’sreceipt

Inventorydatabase

Managementinformation

system

Exceptionreport

Purchasesdatabase

Scanner

Point-of-saletransactionprocessing

system

Itemdatabase

UPC andquantity

Item, quantity,date, time, price

UPC Price

UPC

Quantity,Date,time


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?


Traditional TPS – Order Processing

Order processing Processing an order from entry to delivery,

including traditional accounting transactions

Schematic


Customer

Order entry/sales configuration

Shipmentplanning

Routing

Scheduling

Shipmentexecution

Invoicing

Finishedproduct

inventory

Customer order in person or viamail, phone, EDI, internet

OrdersPlannedshipments

Plannedshipments& routes

Pick list

Shipped orders

Inventory status

Products

Invoice


Data Flow Diagram of an Order Entry System

Schematic


D1 Products/prices D2 Customer payment history

D3 New orders

D4 Back orders

D5 Rejected orders

3. Authorizecredit

2. Verify product numbers & stock on hand

1. Collect order info

4. Notify customer

Customer

BackordersBack orders

Customer notification

Orders

Product numbers,inventory levels

D6 Inventory

Products, priceinformation

Orders

Credit status

Openorders

Rejected,partly filledorders

Rejectedorders


Order Processing Support Systems - Sales Configuration

Sales configuration• Ensures that products and services ordered are

sufficient to accomplish customer’s objectives and will work well together


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)

LOC LINK ITEM NUMBER DESCRIPTION ORDERED SHIPPED BO

8 105 10 L1L16028

20 S8276

30 S8279

40

FASENTING TOOL

STAPLE ¾ INCH

STAPLE 1 INCH

SHIPPING CHARGE

3

15

15

EACH

CASE

CASE

3

15

12 3


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


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


Order Processing Support Systems - Invoicing

Invoicing • Generates customer invoices based on records

received from the shipment execution TPS

• E.g., see Figure 8.11


Order Processing Support Systems - Customer Interaction System

Customer interaction• A system that monitors and tracks each customer

interaction with the company


Requestfor

proposalSale

Problem, idea,request forinformation

Othercontacts

Marketresearch

Sales

Marketing

Qualitycontrol

Productdevelopment

Customerinteraction

system

Customer


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


Purchasing System

Schematic


Raw materialsPacking materialsSpare partsInventory control

Purchase orderprocessing

Receiving

Accountspayable

Employees

Supplier

Inventory controlstatus report

Purchaseorder

Material

Cheque

InvoiceReceivingnotice

Purchaseorder

Purchaseorderrequest


Purchasing System Inventory control

• Maintains stock of items such as raw materials, packing materials, spare parts, and supplies

Purchase order (P.O.) processing• A system that helps purchasing department complete transactions

quickly and efficiently Receiving

• A system that creates a record of expected and actual receipts• Reconciles purchase orders with what is actually received

Accounts payable• A system that increases an organization’s control over purchasing,

improves cash flow• increases profitability, and provides more effective management of

current liabilities


P.O. Example

(Click to view)



Accounting System

Accounting systems Consist of…

• Budget

• Accounts receivable

• Accounts payable

• Payroll

• Asset management

• General ledger


Accounts Payable Example

(Click to view)



Financial Systems

Schematic


Customer

Accountsreceivable

Assetmanagement

Accountspayable

Payroll

BudgetCustomer

Generalledger

Timecards

Paycheques

Labour costs

Expense transactions

Asset depreciation

Amounts owed by companyAmounts paid by company

Cost of assetsPayments

Amounts owed by customersAmounts paid by customers


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


‘Statement of Account’ Example

(Click to view)



Financial Systems – Accounts Receivable

Accounts receivable aging report• Tells managers what bills are overdue, either

customer by customer or in a summary format


‘Aging Report’ Example

(Click to view)



Financial Systems - Payroll

Payroll…• Generates payroll checks and stubs, as well as W-2

statements at the end of the year for tax purposes


Financial Systems - Payroll

Payroll journal• Helps managers monitor total payroll costs for an

organization and the impact of those costs on cash flow


Financial Systems - Asset Management

Asset management transaction processing system

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


Financial Systems - General Ledger


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


Five Stage Model of E-Commerce

The stages consumers experience in the sales life cycle

Schematic


Buyer

1. Search and Identify5. After

sales service

4. Product & service delivery

2. Selection & negotiation

3. Purchasing

Traditionaldelivery

Electronicdistribution


Buying Over the Internet

Prepare list of items needed

Log on to internet

Access supplier’s

home page

Browse supplier’s

catalog

Pick items

Fill out request

for quotation

form

Review response to request for quotation

Place order

Input sent to supplier’s

order entry system


Forecasted Volume of E-Commerce

Mode 1997 2000

Consumer $0.5 billion $7 billion

Business $8.0 billion $66 billion


Purchasing Products and Services Electronically

Establish credit with suppliers Secure E-commerce transactions

Secure financial transaction (SFT) SET = “secure electronic transaction” CyberCash


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


SET ‘Discussion’ (2)

the merchant being able to see the number.

The first applications based on SET are expected appeared in 1998.


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


ERP Examples

Software Vendor Name of Product

Avalon Software Avalon CIM

qad.inc MRG/PRO

Oracle Oracle Manufacturing

SAP America SAP R/3

Baan Triton

PeopleSoft PeopleSoft

J.D. Edwards World


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


SAP Three-Tier Client/Server Architecture

Clientdesktopcomputers

Applicationservers

Databaseserver


Business Application Programming Interface (BAPI)

Businessprocesses

BAPI(public interface)

SAPsoftware

Standardresults

Results consistent with currentversion of SAP software

Standard requestfor data or processing

Request for data or processing consistentwith current version of SAP software


End of Chapter 8

Chapter 9

ITEC 1010 Information and Organizations Chapter 8 Transaction Processing, Electronic Commerce, and Enterprise Resource Planning Systems.

Documents

transaction slide

organizations tps

time slide

batch slide

information integrity

organizations chapter

generated transactions

business transactions