The document discusses various information systems used in organizations, including:
- Transaction processing systems (TPS) that handle routine business transactions from data entry to output reports.
- Management information systems (MIS) that support decision making through reports from TPS data.
- Decision support systems (DSS) that help with non-routine decisions.
- Artificial intelligence/expert systems (AI/ES) that provide sophisticated analysis and problem solving.
The rest of the document provides examples of TPS applications in purchasing, accounting, financial, and other functional areas, and how they integrate to support business processes.
2. TPS, MIS, DSS, and AI/ES
Hierarchy:
AI/ES
DSS
MIS
TPS
Information
Data
Less More Less More
More MoreLess Less
Routine
Decision
support
Input &
output
Sophistication
& complexity of
processing & analysis
K. Adisesha 2
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
K. Adisesha 3
4. 4-4
Learning Objectives
Relate functional areas and business processes to the
value chain model
Identify functional management information systems
Describe the transaction processing system and
demonstrate how it is supported by IT
Describe the support provided by IT to each of these:
production/operations, marketing and sales,
accounting, finance, and human resources
management
Describe the benefits and issues of integrating
functional information systems
Describe the role of IT in facilitating customer
relationship management (CRM)
5. 4-5
Objectives of TPS
To provide all the information needed by law and/or by
organizational policies to keep the business running
properly and efficiently
To allow for efficient and effective operation of the
organization
To provide timely documents and reports
To increase the competitive advantage of the
corporation
To provide the necessary data for tactical and strategic
systems such as DSS applications
To assure accuracy and integrity of data and information
To safeguard assets and security of information
6. 4-6
Integrated Solutions Help Colonial
Building Supply, Stay Competitive
The Problem
to remain competitive, Colonial Building Supply needed a
technology to provide it with information about inventory
levels and customer buying trends
The Solution
purchased a integrated system that includes: accounting,
POS terminal, inventory control, purchasing/receiving,
employee time control and attendance, hand-held
automatic identification and data collection, and several
others
The Results
Lower cost for data entry, reduction in inventory and
storage space, fast access to information, better customer
service, and higher employee satisfaction
7. 4-7
Crossing Functional Boundaries at
Colonial
IT support the routine processes of a retailer,
enabling it to be efficient and effective and to
satisfy its customers
IT software helped the modernization and
reengineering of the company’s major business
processes
The software supports several business processes,
not just one
The system’s major applications were in logistics.
However, a vendor provides integrated software
IT can be beneficial to a relatively small company
The integration includes connection to business
partners using the Internet
8. 4-8
Porter’s Value Chain Model and The
Supply Chain
Typical functional areas mapped on the value chain
of a manufacturing company
Firm Infrastructure
(Accounting, Finance, General Management)
Human Resource Management
(Human Resources)
Technology Development
(Engineering)
Procurement
(Material Management-Operations)
SupportActivities
Service
(Service or
Marketing)
Inbound
Logistics
(Material
Managaement-
Operations)
Operations
(Operations)
Outbound
Logistics
(Material
Managemnet-
Operations)
Marketing
and Sales
(Marketing)
PrimaryActivities
9. 4-9
Major Characteristics of
Functional Information Systems
A functional information systems comprises several smaller
information systems that support specific activities
performed by each functional area
The specific IS applications in any functional area can be
integrated to form a coherent departmental functional, or
they can be completely independent
Functional information systems interface with each other to
form the organization-wide information system
Some organizational information systems interface with the
business environment
Information systems applications support the three levels of
an organization’s activities: operational, managerial, and
strategic
10. 4-10
Computerization of
Routine Transaction Processes
Transaction Processing System (TPS)
supports transaction processes
monitors, collects, stores, processes, and
disseminates information for all routine
core business transactions
includes accounting and finance
transactions and some sales, personnel,
and production activities
11. 4-11
Major Characteristics of TPS
Large amount of data are processed
The sources of data are mostly internal, and the output is
intended mainly for an internal audience
The TPS processes information on a regular basis
Large storage (database) capacity is required
High processing speed is needed due to the high volume
TPS basically monitors and collects past data
Input and output data are structured
High level of detail is usually observed
Low computation complexity
High level of accuracy, data integrity, and security is needed
High reliability is required
Inquiry processing is a must
12. 4-12
Typical Tasks in Transaction
Processing
POS
Terminal
Terminal
File
Product
Processing
System
Inventory
Files
Department
Sales Files
Customer
Makes a
Purchase
Master
Files
13. 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
K. Adisesha 13
20. Data Processing Activities
Common to TPSs
A transaction processing cycle
Data collection
Data editing
Data correction
Data manipulation
Data storage
Document production
Schematic
K. Adisesha 20
22. 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
K. Adisesha 22
24. 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?
K. Adisesha 24
25. Traditional TPS –
Order Processing
Order processing
Processing an order from entry to delivery, including
traditional accounting transactions
Schematic
K. Adisesha 25
28. D1 Products/prices D2Customer payment history
D3 New orders
D4 Back orders
D5 Rejected orders
3. Authorize
credit
2. Verify
product
number
s &
stock
on
hand
1. Collect
order
info
4. Notify
custom
er
Customer
Back
ordersBack orders
Customer notification
Orders
Product numbers,
inventory levels
D6 Inventory
Products, price
information
Orders
Credit status
Open
orders
Rejected,
partly filled
orders
Rejected
orders
K. Adisesha 28
29. 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
K. Adisesha 29
30. 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 )
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
K. Adisesha 30
31. 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
K. Adisesha 31
32. 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
K. Adisesha 32
33. Order Processing Support Systems -
Invoicing
Invoicing
Generates customer invoices based on records received from
the shipment execution TPS
E.g., see Figure
K. Adisesha 33
34. Order Processing Support Systems - Customer
Interaction System
Customer interaction
A system that monitors and tracks each customer interaction
with the company
K. Adisesha 34
36. 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
K. Adisesha 36
38. Raw materials
Packing materials
Spare parts
Inventory control
Purchase order
processing
Receiving
Accounts
payable
Employees
Supplier
Inventory control
status report
Purchase
order
Material
Cheque
InvoiceReceiving
notice
Purchase
order
Purchase
order
request
K. Adisesha 38
39. 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
K. Adisesha 39
47. 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
K. Adisesha 47
50. Financial Systems –
Accounts Receivable
Accounts receivable aging report
Tells managers what bills are overdue, either customer by
customer or in a summary format
K. Adisesha 50
53. Financial Systems - Payroll
Payroll…
Generates payroll checks and stubs, as well as W-2 statements
at the end of the year for tax purposes
K. Adisesha 53
54. Financial Systems - Payroll
Payroll journal
Helps managers monitor total payroll costs for an
organization and the impact of those costs on cash flow
K. Adisesha 54
55. Financial Systems -
Asset Management
Asset management transaction processing system
A system that controls investments in capital equipment and
manages depreciation for maximum tax benefits
K. Adisesha 55
57. 4-57
Typical TPS of a Manufacturer
Vendors
Customers
General
Ledger
Periodic
Statements
Manufac-
turing
Purchasing
Order
Receiving
Goods
Accounts
Payable
Shipping
Accounts
Receivable
Inventory
Customer
Order
Taxes
Payroll
Fixed
Assets
58. 4-58
Innovative IT Applications
in the Functional Areas
Supply-Chain Management
objective is to support the flow of goods and
materials from the original supplier through
multiple production and logistic operations to
the ultimate consumer
extensive integrated software is available for
managing portions of the supply chain as well as
the entire process
59. 4-59
Supply-Chain Management
Suppliers Inbound Logistics Production
Transaction Delivery Customer
a) Supply Chain direct to customer
Suppliers Manufacturing Distribution Retail Outlet Customer
Transfer Transfer Transfer Transfer
Supply Chain Organization
Information Flow
Cash
Flow
b) Supply Chain including wholesalers and retailers
62. 4-62
Automatic Design Work
and Manufacturing
Computer-aided Design (CAD)
Computer-aided Engineering (CAE)
Computer-aided Manufacturing (CAM)
63. 4-63
Computer-integrated
Manufacturing (CIM)
Three basic goals:
simplification
automation
integration and coordination
The CIM model
made up by general business management, product
and process definition, manufacturing planning and
control, factory automation, and information
resource management
64. 4-64
Channel Systems
The customer is king (queen)
Customer profiles and preference
analysis
Prospective customer lists and
marketing databases
Mass customization
Targeted Advertisement on the Web
customer inquiry systems and
Automated Help Desk (EC application)
65. 4-65
Channel Systems
Telemarketing
Capabilities
personalized contact with the customers
allows customers to buy at their convenience
effective in informing customers about a
company’s products and services
Limitations
cost can be high
difficult to find good telemarketers
may be seen by many as a nuisance
challenges in reaching people
66. 4-66
Distribution Channels
Distribution channels management
DSS models are frequently used to support the
decision of accomplishing by a company, or by a
subcontractor
Improving sales at retail stores
using IT, it is possible to improve the situation by
reengineering the checkout process
67. 4-67
Marketing Management
Pricing of products or services
Salesperson productivity
Productivity software
Products and customers profitability analysis
Sales analysis and trends
New products, services, and market planning
68. 4-68
Managing the Accounting
and Finance Systems
TACTIAL SYSTEMS
a. Budgeting Preparation and Control
b. Investment Management
c. Capital Budgeting d. Cost Analysis and Control
e. Tax Management f. Auditing
g. Financial Planning
INTERNAL
ENVIRONMENT
Top Management
Operation/
Production
Marketing
HRM
Engineering
EXTERNAL
ENVIRONMENT
IRS
SEC
Vendors
Clients
CPA Companies
Suppliers
Customers
Business Partners
STRATEGIC SYSTEMS
a. Strategic Planning b. Ratios and Financial Health
c. Merger and Acquisition Analysis
OPERATIONAL AND
TRANSACTION PROCESSING
SYSTEMS
a. The General Ledger b. Sales Order Processing
c. Accounts Payable and Receivable
d. Receiving and Shipping
e. Payroll f. Inventory Management
g. Periodical Reports & Statements
69. 4-69
Managing the Accounting
and Finance Systems
Strategic Systems
Tactical Systems
Operational and
Transaction
Processing System
Internal
Environment
External
Environment
70. 4-70
Financial Planning and
Budgeting
Financial and economic forecasting
Planning for incoming funds
Budgeting preparation and operation
Capital budgeting decision
71. 4-71
Investment Management
Access to financial and economical reports
Internet meta-search engines for finding financial data
Internet directories and yellow pages
Software for monitoring, interpreting, analyzing
financial data, and alerting management
Financial analysis
Treasury risk management systems (TRMS)
72. 4-72
Control and Auditing
Budgetary control
Auditing
Financial health analysis
Profitability analysis and cost control
Product pricing
74. 4-74
Human Resources
Maintenance and Development
Performance evaluation
Training and human resources
development
Turnover, tardiness, and absenteeism
analyses
75. 4-75
Human Resources
Planning and Management
Personnel planning
Succession planning
Labor-management negotiations
Benefits administration
76. 4-76
Internet Applications
Eddify Corporation’s employee service systems
allows users to access information via PCs, voice-
recognition phone, kiosks, or faxes.
Oracle corporation conducts its flexible benefits
enrollment program on the intranet
Apple Computers Inc. conducts extensive
education and development activities on the
intranet, including a remote management-
training program
77. 4-77
Reasons for Integration
Helps to reduce cost
Helps to increase employees’ productivity
Helps to facilitate information sharing and
collaboration which are necessary for improving
customer service
IT helps CRM
78. 4-78
Customer Relationship
Management (CRM)
The company’s success depends on effectively
managing relationship with customers
Relationship marketing
overt attempt of exchange partners to build a long-term
association, characterized by purposeful cooperation
and mutual dependence on the development of social, as
well as structural, bongs
include the concepts of loyalty and trust
79. 4-79
How is CRM Practiced?
Know who the company’s current and
potential customers are
Know who is a good customer, and who are
the most profitable customers for the
business
Know why a certain customer is in the
market, why he or she does business with the
company, what the customers like and dislike
about he business
80. 4-80
The Enabling Role of IT
Using intelligent agent technology, American Airlines
generates personalized Web pages for each of about 800,000
registered travel-planning customers
Manchester Metropolitan University tracks a population of
30,000 students, manages modular courses, and keeps the
student management systems updated by databases and
parallel processing
Charles schwab’s call center handles effectively over 1 million
customer calls every day
State Farm Insurance Co. manages several initiatives for
retaining customers by a computerized incentives system
81. 4-81
CRM Activities and IT Support
CRM Activity (Sample) IT Support
Information about choice of
doctors, hospitals, and alternative
medicine offered by HMO’s.
Internet; online customer
survey; groupware; expert
systems for giving advice.
Customized information and
services in many languages;
discounts based on healthy lifestyle;
appointment reminders;
information on doctors; and
medical research. Help center to
solve HMO member problem
E-mail; data warehouse for
customer information; data
mining; intelligent translating
systems; search engines on the
Web help center.
Web-based integrated call centers;
quick reply to customers’ inquiries
Facilitates help-desk activities;
intelligent agents for
answering FAQs
82. 4-82
CRM Activities and IT Support
CRM Activity (Sample) IT Support
Monitoring of customers’ orders
inside the company.
Workflow software for
planning and monitoring;
intranets
Appointment of account managers;
creation of specialized teams (BPR)
Expert systems for advice;
groupware for collaboration.
Seminars and educational activities
for customers
Online training; Internet.
Self-tracking of shipments and
orders.
Web-based training software;
workflow
Segmenting of customers Data mining in data
warehouses.
Matching customers with products
and services.
Web-based intelligent agents.
83. 4-83
CRM Activities and IT Support
CRM Activity (Sample) IT Support
Customizing products to suit
customers’ specific needs.
Intelligent agents to find what
customer wants; CAD/CAM to
reduce cost of customization
Customer discussion forums. Chat room; sponsored
newsgroups.
Loyalty programs for repeat
customers.
Data warehouses and data
mining of customers’ activities;
smart cards that record
purchasers’ activities.
Customer participation in product
(service) development.
Online surveys; newsgroups;
chat room; e-mail
Proactive approach to customers
based on their activity level.
Data warehouse; data mining.
84. 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
K. Adisesha 84
85. Five Stage Model of
E-Commerce
The stages consumers experience in the sales life cycle
Schematic
K. Adisesha 85
86. Buyer
1. Search and
Identify5. After sales
service
4. Product &
service
delivery
2. Selection &
negotiation
3. Purchasing
Traditional
delivery
Electronic
distribution
K. Adisesha 86
87. 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
quotatio
n form
Review
response
to request
for
quotation
Place
order
Input sent to
supplier’s
order entry
system
K. Adisesha 87
89. Purchasing Products and Services
Electronically
Establish credit with suppliers
Secure E-commerce transactions
Secure financial transaction (SFT)
SET = “secure electronic transaction”
CyberCash
K. Adisesha 89
90. 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
K. Adisesha 90
91. SET ‘Discussion’ (2)
the merchant being able to see the number.
The first applications based on SET are expected appeared in 1998.
K. Adisesha 91
92. 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
K. Adisesha 92
93. 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
K. Adisesha 93
94. 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
K. Adisesha 94
95. SAP Three-Tier Client/Server Architecture
Client
desktop
computers
Application
servers
Database
server
K. Adisesha 95
96. Business Application Programming Interface
(BAPI)
Business
processes
BAPI
(public interface)
SAP
software
Standard
results
Results consistent with current
version of SAP software
Standard request
for data or processing
Request for data or processing consistent
with current version of SAP software
K. Adisesha 96