Enterprise resources planning

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

3. Principles of Information Systems, Seventh Edition 3
• 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

4. Principles of Information Systems, Seventh Edition 4
• 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

5. Principles of Information Systems, Seventh Edition 5
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

6. Principles of Information Systems, Seventh Edition 6
Figure 9.1: TPS, MIS/DSS, and Special
Information Systems in Perspective

7. Principles of Information Systems, Seventh Edition 7
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

8. Principles of Information Systems, Seventh Edition 8
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

9. Principles of Information Systems, Seventh Edition 9
Figure 9.2: Batch Versus Online
Transaction Processing

10. Principles of Information Systems, Seventh Edition 10
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

11. Principles of Information Systems, Seventh Edition 11
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

12. Principles of Information Systems, Seventh Edition 12
Figure 9.3: Integration of a Firm’s TPSs

13. Principles of Information Systems, Seventh Edition 13
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

14. Principles of Information Systems, Seventh Edition 14
Figure 9.4: A Simplified Overview of a
Transaction Processing System

15. Principles of Information Systems, Seventh Edition 15
Figure 9.5: Data Processing Activities
Common to TPSs

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

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

18. Principles of Information Systems, Seventh Edition 18
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

19. Principles of Information Systems, Seventh Edition 19
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?

20. Principles of Information Systems, Seventh Edition 20
Table 9.2: The Systems That Support
Order Processing, Purchasing, and
Accounting Functions

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

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

23. Principles of Information Systems, Seventh Edition 23
Figure 9.7: Order Processing Systems

24. Principles of Information Systems, Seventh Edition 24
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

25. Principles of Information Systems, Seventh Edition 25
Figure 9.8: Data Flow Diagram of an Order
Entry System

26. Principles of Information Systems, Seventh Edition 26
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

27. Principles of Information Systems, Seventh Edition 27
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

28. Principles of Information Systems, Seventh Edition 28
Figure 9.12: Customer Relationship
Management System

29. Principles of Information Systems, Seventh Edition 29
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

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

31. Principles of Information Systems, Seventh Edition 31
Figure 9.13: Purchasing Transaction
Processing System

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

33. Principles of Information Systems, Seventh Edition 33
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

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

35. Principles of Information Systems, Seventh Edition 35
Figure 9.16: Financial Systems

36. Principles of Information Systems, Seventh Edition 36
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

37. Principles of Information Systems, Seventh Edition 37
Figure 9.17: An Accounts Receivable
Statement

38. Principles of Information Systems, Seventh Edition 38
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

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

40. Principles of Information Systems, Seventh Edition 40
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

41. Principles of Information Systems, Seventh Edition 41
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

42. Principles of Information Systems, Seventh Edition 42
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

43. Principles of Information Systems, Seventh Edition 43
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

44. Principles of Information Systems, Seventh Edition 44
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

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

46. Principles of Information Systems, Seventh Edition 46
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

47. Principles of Information Systems, Seventh Edition 47
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

48. Principles of Information Systems, Seventh Edition 48
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