Efficient Transaction Processing Systems in Modern Enterprises

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

2. TPS, MIS, DSS, and AI/ES • Hierarchy: Information AI/ES Less More Less More DSS Sophistication& complexity ofprocessing & analysis Decisionsupport Input & output Routine MIS TPS Data More Less More Less

3. 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

4. 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

5. Batch Schematic Input (batched) Data entryof accumulatedtransactions Output

6. On-line Schematic Terminal Terminal Terminal Output Immediateprocessingof eachtransaction Terminal Terminal Terminal

7. [ ]x n = Applicationssoftware People Schematic Integration of TPSs

9. 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

10. Simplified Overview of aTransaction Processing System Schematic

11. Data entry & input Processing Documents& reports • Documents: • pick list • cheques to vendors • receiving notices • paycheques • Operational reports: • finished product inventory status • raw materials; packing materials; spare parts; inventory status Database • 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

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

13. Original data Datacollection Dataedit Datamanipulation Datacorrection Datastorage Documentproduction

14. 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

15. Point-of-Sale Transaction Processing System Customer’sreceipt Inventorydatabase Exceptionreport Managementinformationsystem UPC andquantity Point-of-saletransactionprocessingsystem UPC Scanner Quantity, Date, time Item, quantity, date, time, price Purchasesdatabase UPC Price Itemdatabase

16. 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?

17. Traditional TPS – Order Processing • Order processing • Processing an order from entry to delivery, including traditional accounting transactions Schematic

18. Customer Invoice Products Customer order in person or viamail, phone, EDI, internet Order entry/ sales configuration Inventory status Orders Plannedshipments Finishedproductinventory Shipmentplanning Routing Pick list Plannedshipments & routes Shipmentexecution Scheduling Shipped orders Invoicing

19. Data Flow Diagram of an Order Entry System Schematic

20. D5 Rejected orders D6 Inventory D1 Products/prices D2 Customer payment history Product numbers,inventory levels Products, priceinformation Credit status 2. Verify product numbers & stock on hand Openorders 3. Authorizecredit 1. Collect order info Orders Orders D3 New orders Rejected,partly filled orders Backorders Back orders 4. Notify customer D4 Back orders Customer Customer notification Rejectedorders

21. 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

22. 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)

23. 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

24. 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

25. Order Processing Support Systems - Invoicing • Invoicing • Generates customer invoices based on records received from the shipment execution TPS • E.g., see Figure 8.11

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

27. Customer Requestforproposal Sale Problem, idea, request for information Othercontacts Customerinteractionsystem Marketresearch Productdevelopment Sales Qualitycontrol Marketing

28. 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

29. Purchasing System Schematic

30. Raw materialsPacking materialsSpare partsInventory control Inventory controlstatus report Purchaseorder request Employees Purchase orderprocessing Purchaseorder Purchaseorder Receiving Supplier Material Invoice Receivingnotice Accountspayable Cheque

31. 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

32. P.O. Example • (Click to view)

34. Accounting System • Accounting systems • Consist of… • Budget • Accounts receivable • Accounts payable • Payroll • Asset management • General ledger

35. Accounts Payable Example • (Click to view)

37. Financial Systems Schematic

38. Customer Assetmanagement Cost of assets Payments Accountspayable Accountsreceivable Amounts owed by companyAmounts paid by company Amounts owed by customersAmounts paid by customers Payroll Generalledger Labour costs Asset depreciation Paycheques Expense transactions Timecards Customer Budget

39. 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

40. ‘Statement of Account’ Example • (Click to view)

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

43. ‘Aging Report’ Example • (Click to view)

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

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

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

48. Financial Systems - General Ledger

49. 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

50. Five Stage Model of E-Commerce • The stages consumers experience in the sales life cycle Schematic