Information Systems for Business Operations


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Information Systems for Business Operations

  1. 1. Chapter 10 Information Systems for Business Operations V. LECTURE NOTES SECTION I: Business Information Systems 10-1 Information Systems in Business: As a prospective managerial end user you should have a general understanding of the major ways information systems are used to support each of the functions of business. The term business information systems is used to describe a variety of types of information systems (transaction processing, information reporting, decision support, etc.) that support the functions of business such as accounting, finance, marketing, or human resource management. Analyzing Gulf States Paper We can learn a lot about how information technology provides major business benefits in manufacturing and other functional areas of business from the Real World Case of Gulf States Paper Corporation. Take a few minutes to read it, and we will discuss it (See Gulf States Paper Corporation in section XI). 10-2 Cross Functional Information Systems: [Figure 10.2] Information systems can be grouped into business function categories, however, in the real world information systems are typically integrated combinations of functional information systems. Such systems support business processes, such as product development, production, distribution, order management, customer support, and so on. There is a strong emphasis in many organizations to develop such composite or cross-functional information systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes. These organizations view cross- functional information systems as a strategic way to share information resources and improve the efficiency and effectiveness of a business, thus helping it attain its strategic objectives. Applications of information systems in the functional areas of business include: 1. Production/Operations IS 2. Marketing IS 3. Financial IS 4. Accounting IS 5. Human Resource Management IS Business firms are turning to Internet technologies to integrate the flow of information among their internal business functions and their customers and suppliers. Companies are using the World Wide Web and their intranets and extranets as the technology platform for their cross-functional and interorganizational information systems. In addition, many companies have moved from functional mainframe legacy systems to cross-functional client/server network applications. This typically has involved installing enterprise resource planning (ERP) or supply chain management (SCM) software. Instead of focusing on the information processing requirements of business functions, ERP software focuses on supporting the supply chain processes involved in the operations of a business. 10-3 Marketing Information Systems: [Figure 10.5] The business function of marketing is concerned with the planning, promotion, and sale of existing products in existing markets, and the development of new products and new markets to better serve present and potential customers. Marketing information systems integrate the information flow required by many marketing activities. Marketing information systems provide information for: 1. Internet/intranet web sites and services make an interactive marketing process possible where customers can become partners in creating, marketing, purchasing, and improving products and services.
  2. 2. 2. Sales force automation systems use mobile computing and Internet technologies to automate many information processing activities for sales support and management. 3. Other marketing systems assist marketing managers in product planning, pricing, and other product management decision, advertising and sales promotion strategies, and market research and forecasting. 4. Planning, control, and transaction processing in the marketing function. 5. Strategic, tactical and operational information systems assist marketing managers in product planning, pricing decisions, advertising and sales promotion strategies and expenditures, forecasting market potential for new and present products, and determining channels of distribution. 6. Control Reporting Systems support the efforts of marketing managers to control the efficiency and effectiveness of the selling and distribution of products and services. 7. Analytical reports provide information on a firm's actual performance versus planned marketing objectives. Interactive Marketing: [Figure 10.5] The explosive growth of Internet technologies has had a major impact on the marketing function. The term interactive marketing has been coined to describe a type of marketing that is based on using the Internet, intranets, and extranets to establish two-way interaction between a business and its customers or potential customers. The goal of interactive marketing is to enable a company to profitably use those networks to attract and keep customers who will become partners with the business in creating, purchasing, and improving products and services. Figure 10.5 summarizes several important ways that computer-based information systems support the marketing function. These include: 1. Interactive Marketing 2. Sales Force Automation 3. Sales Management 5. Product Management 5. Advertising and Promotion 6. Sales Forecasting 7. Market Research 8. Marketing Management Note: The Internet has become the primary distribution channel of the new online marketing environment. Customers are not just passive participants who receive media advertising prior to purchase, but are actively engaged in a network-enabled proactive and interactive process. Note that interactive marketing views prospective customers as belonging to many distinct market segments that must be approached differently online through targeted marketing techniques. Interactive marketing also encourages customers to become involved in product development, delivery, and service issues. This is enabled by various Internet technologies, including: 1. Usenet discussion groups 2. Web forms and questionnaires 3. E-mail correspondence The expected outcomes of interactive marketing are a rich mixture of: 1. Vital marketing data 2. New product ideas 3. Volume sales 4. Strong customer relationships Sales Force Automation Increasingly, computers and networks are providing the basis for sales force automation. In many companies, the sales force is being outfitted with notebook computers that connect them to Web browsers, and sales contact management software marketing Web sites on the Internet, extranets, their company intranets. Characteristics of sales force automation include: 1. Increase in the personal productivity of salespeople 2. Dramatically speeds up the capture and analysis of sales data from the field to marketing managers at company
  3. 3. headquarters. 3. Allows marketing and sales management to improve the support they provide their salespeople. 4. Many companies view sales force automation as a way to gain a strategic advantage in sales productivity and marketing responsiveness. 10-4 Sales and Product Management: Sales managers must plan, monitor, and support the performance of the salespeople in their organizations. Computer-based systems produce sales analysis reports that analyze sales by product, product line, customer, type of customer, salesperson, and sales territory. Such reports help marketing managers monitor the sales performance of products and salespeople and help them to develop sales support programs to improve sales results. Some of the benefits of Web-based sales force automation include: 1. Shorten the sales cycle through prequalification of prospects. 2. Increase revenue through targeted marketing 3. Automate the management and qualification of web leads. 4. Capture all customer information directly into sales databases. 5. Enhance order management with access to data on pricing, promotions, availability, production schedules, export regulations, carriers, and transportation schedules. Product managers need information to: ∃ Plan and control the performance of specific products, product lines, and brands. ∃ Computers help provide price, revenue, cost, and growth information for existing products and new product development. Provide information and analysis for pricing decision is a major function of this system. ∃ Information is also needed on the manufacturing and distribution resources proposed products will require. ∃ Computer-based models may be used to evaluate the performance of current products and the prospects for success of proposed products. Advertising and Promotion Marketing managers need information to help them maximize sales at the lowest possible costs for advertising and promotion. Computers use market research information and promotion models to help: ∃ Select media and promotional methods ∃ Allocate financial resources ∃ Control and evaluate results of various advertising and promotion campaigns. Targeted Marketing: [Figure 10.10] Targeted marketing has become an important tool in developing advertising and promotion strategies for a company’s electronic commerce web sites. Target marketing is an advertising and promotion management concept that includes five targeting components: ∃ Community. Companies can customize their web advertising messages and promotion methods to appeal to people in specific communities. These can be communities of interest, such as virtual communities. ∃ Content. Advertising such as electronic billboards or banners can be placed on various web site pages in addition to a company’s home page. These messages reach the targeted audience. ∃ Context. Advertising appears only in web pages that are relevant to the content of a product or service. So advertising is targeted only at people who are already looking for information about a subject matter that is related to a company’s products. ∃ Demographic/Psychographic. Marketing efforts can be aimed only at specific types or classes of people. ∃ Online behaviour. Advertising and promotion efforts can be tailored to each visit to a site by an individual. This strategy is based on “web cookie” files recorded on the visitor’s disk drive from previous visits. Cookie files enable a company to track a person’s online behaviour at a web site so marketing efforts can be instantly developed and targeted to that individual at each visit to their web site. Marketing Research and Forecasting
  4. 4. Market research information systems provide marketing intelligence to help managers make better marketing forecasts and develop more effective marketing strategies. Marketing information systems help market researchers, collect, analyze, and maintain an enormous amount of information on a wide variety of market variables that are subject to continual change. This includes: ∃ Information on customers, prospects, consumers, and competitors. ∃ Market, economic, and demographic trends are continually analysed ∃ Data can be gathered from many sources, including a company’s databases, data marts and data warehouses, World Wide Web sites, and telemarketing services companies. ∃ Statistical software tools can help managers analyze market research data, and forecast sales and other important market trends. 10-5 Manufacturing Information Systems Manufacturing information systems support the production/operations function, which includes all activities concerned with the planning and control of the processes that produce goods or services. The production/operations function is concerned with the management of the operational systems of all business firms. The planning and control information systems used for operations management and transaction processing support all firms that must plan, monitor, and control inventories, purchases, and the flow of goods and services. Computer Integrated Manufacturing (CIM): Computer-based manufacturing information systems use several major techniques to support computer-integrated manufacturing (CIM). CIM is an overall concept that stresses that the goals of computer use in factory automation must be to: • Simplify - (reengineer) production processes, product designs, and factory organization as a vital foundation to automaton and integration. • Automate - Production processes and the business functions that support them with computers and robots. •Integrate - All production and support processes using computers and telecommunications networks. Overall goal of CIM: - Is to create flexible, agile, manufacturing processes that efficiently product products of the highest quality. Thus, CIM supports the concepts of: 1. Flexible manufacturing systems 2. Agile manufacturing 3. Total quality management Results of CIM: - Implementing such manufacturing concepts enables a company to quickly respond to and fulfill customer requirements with high-quality products and services. Uses of computers in manufacturing include: 1. Computer-aided engineering (CAE) 2. Computer-aided design (CAD) 3. Computer-aiding processing planning (CAPP) 4. Material requirements planning (MRP) 5. Manufacturing resource planning (MRP) 6. Computer-aided manufacturing (CAM) Computer-aided manufacturing - (CAM) systems are those that automate the production process. For example, this could be accomplished by monitoring and controlling the production process in a factory through manufacturing execution systems, or by directly controlling a physical process (process control), a machine tool (machine control), or
  5. 5. machines with some humanlike work capabilities (robots). Manufacturing execution systems - (MES) are performance monitoring information systems for factory floor operations. They monitor, track, and control the five essential components involved in a production process: 1. Materials 2. Equipment 3. Personnel 4. Instructions and specifications 5. Production facilities. MES includes: 1. Shop floor scheduling and control systems 2. Machine control systems 3. Robotics control systems 4. Process control systems Some of the benefits of CIM are: 1. Increased efficiency through: -work simplification & automation, - better production schedule planning - better balancing of production workloads in production capacity 2. Improved utilization of facilities, higher productivity, better quality control through: - continuous monitoring - feedback and control of factory operations, equipment and robots. 3. Reduced investments in production inventories & facilities - work simplification - just-in-time inventory policies - better planning and control of production - better planning and control of finished goods requirements 4. Improved customer service - reducing out-of-stock situations - producing high-quality products that better meet customer requirements Collaborative Manufacturing Networks: Manufacturing processes like computer-aided engineering and design, production control, production scheduling, and procurement management typically involve a collaborative process. Increasingly, this involves using the Internet, intranets, extranets, and other networks to link the workstations of engineers and other specialists with their colleagues at other sites. These collaborative manufacturing networks may link employees within a company, or include representatives from a company’s suppliers or customers wherever they may be located. Process Control: Process control is the use of computers to control an ongoing physical process. Process control computers are used to control physical processes in such areas as: 1. Petroleum refineries 5. Food product manufacturing plants 2. Cement plants 6. Pulp and paper mills 3. Steel mills 7. Electrical power plants 4. Chemical plants Machine Control: Machine control is the use of a computer to control the actions of a machine. This is also popularly called numerical control. The control of machine tools in factories is a typical numerical control application, though it also refers to the control of typesetting machines, weaving machines, and other industrial machinery. Machine control computers are used in such areas as: 1. Factories 2. Industrial shops 3. Machine tooling shops
  6. 6. Robotics: Robots are smart machines which directly control their own activities with the aid of microcomputers. Robotics is the technology of building and using machines (robots) with computer intelligence and computer controlled humanlike physical capabilities (dexterity, movement, vision, and so on). Robots are used as “steel-collar workers” to increase productivity and cuts costs. They are used in such areas as: 1. Factories 2. Hazardous areas or work activities Computer-Aided Engineering: Manufacturing engineers use computer-aided engineering (CAE) to simulate, analyze, and evaluate the models of product designs they have developed using computer-aided design (CAD) methods. Networks of powerful engineering workstations with enhanced graphics and computational capabilities and CAD software help them: 1. Analyze and design products and manufacturing processes and facilities. 2. Refine an engineer’s initial drawings and provide three-dimensional computer graphics that can be rotated to display all sides of the object being designed. 3. Zoom in for close-up views of a specific part and even make parts of the product appear to move as they would in normal operation. 4. Design can be converted into a finished mathematical model of the product. 10-6 Human Resource Information Systems: The human resource management (HRM) function involves the recruitment, placement, evaluation, compensation, and development of the employees of an organization. The goal of HRM is the effective and efficient use of the human resources of a company. Thus, human resource information systems are designed to support: 1. Planning to meet the personnel needs of the business. 2. Development of employees to their full potential. 3. Control of all personnel policies and programs. Traditionally, businesses used computer-based information systems to: 1. Produce paychecks and payroll reports 2. Maintain personnel records 3. Analyze the use of personnel in business operations. Many firms have gone beyond these traditional personnel management functions and have developed human resource information systems (HRIS) that also support: 1. Recruitment, selection and hiring 2. Job placement 3. Performance appraisals 4. Employee benefit analysis 5. Training and development 6. Health, safety, and security HRM and the Internet: The Internet has become a major force for change in human resource management. For example, companies are: 1. Recruiting for employees through recruitment sections of their corporate web sites. 2. Using commercial recruiting services and databases on the World Wide Web, posting messages in selected Internet newsgroups, and communicating with job applicants by Internet E-mail.
  7. 7. HRM and the Corporate Intranet Intranet technologies allow companies to process most common HRM applications over their corporate intranets. For example: 1. Intranets allow the HRM department to provide around-the-clock services to their customers and employees. 2. They also disseminate valuable information faster than through previous company channels. 3. Intranets can collect information online from employees for input to their HRM files, and they can enable employees to perform HRM tasks with little intervention by the HRM department. 4. Intranet can serve as a superior training pool. Staffing the Organization The staffing function must be supported by information systems that record and track human resources within a company to maximize their use. These systems are used in personnel record keeping systems, employee skills inventory systems, and personnel requirements forecasting systems. Training & Development: Information systems help human resource managers plan and monitor employee recruitment, training, performance appraisals, and career development by analysing the success history of present programs. They also analyze the career development status of each employee to determine whether development methods such as training programs and periodic performance appraisals should be recommended. Compensation Analysis: Information systems can help analyse the range and distribution of employee compensation (wages, salaries, incentive payments, and fringe benefits) within a company and make comparisons with compensation paid by similar firms or with various economic indicators. This information is useful for: 1. Planning changes in compensation, especially if negotiations with labour unions are involved. 2. Helps keep the compensation of a company competitive and equitable, while controlling compensation costs. Governmental Reporting: Reporting to government agencies is a major responsibility of human resource management. Organizations use computer- based information systems to keep track of the statistics and produce reports required by a variety of government laws and regulations. These statistics may concern issues such as: 1. Equal opportunity policies and statistics 2. Employee health 3. Workplace accidents and hazards 4. Safety procedures 10-7 Accounting Information Systems: [Figure 10.24] Accounting information systems are the oldest and most widely used information systems in business. Computer based accounting information systems: 1. Record and report the flow of funds through an organization on a historical basis and produce important financial statements such as balance sheets and income statements. 2. Produce forecasts of future conditions such as projected financial statements and financial budgets. Operational Accounting Systems - focus on transaction processing systems. They emphasize: 1. Legal and historical record-keeping 2. Production of accurate financial statements. Typically, these systems include transaction processing systems such as: 1. Order processing 4. Accounts payable
  8. 8. 2. Inventory control 5. Payroll systems 3. Accounts receivable 6. General ledger systems Management Accounting Systems - focus on the planning and control of business operations. They emphasize: 1. Cost accounting reports 2. Development of financial budgets & projected financial statements 3. Analytical reports comparing actual to forecasted performance. The six most widely used accounting information systems include: 1. Order Processing 4. Accounts Payable 2. Inventory Control 5. Payroll 3. Accounts Receivable 6. General Ledger Online Accounting Systems: Accounting information systems are being affected by Internet and client/server technologies. Using the Internet, intranets, extranets, and other networks changes how accounting information systems monitor and track business activity. The online, interactive nature of such networks calls for new forms of transaction documents, procedures, and controls. This particularly applies to systems like order processing, inventory control, accounts receivable, and accounts payable. These systems are directly involved in the processing of transactions between a business and its customers and suppliers. Many companies are using or developing network links to these trading partners for such applications, using the Internet or other networks. Order Processing: Order processing, or sales order processing, is an important transaction processing system that captures and processes customer orders and produces data needed for sales analysis and inventory control. In many firms, it also keeps track of the status of customer orders until goods are delivered. Computer-based sales order processing systems: 1. Provide a fast, accurate, and efficient method of recording and screening customer orders and sales transactions. 2. Provide inventory control systems with information on accepted orders so they can be filled as quickly as possible. Inventory Control: Inventory control systems process data reflecting changes to items in inventory. A computer-based inventory control system: 1. Records changes to inventory levels and prepares appropriate shipping documents 2. May notify managers about items that need reordering and provide them with a variety of inventory status reports. 3. Help a business provide high-quality service to customers while minimizing investment in inventory and inventory carrying costs. Accounts Receivable: Accounts receivable systems keep records of amounts owed by customers from data generated by customer purchases and payments. Accounts receivable systems: 1. Produce invoices to customers, monthly customer statements and credit management reports. 2. Stimulate prompt customer payments by preparing accurate and timely invoices and monthly statements to credit customers 3. Provide managers with reports to help them control the amount of credit extended and the collection of money owed. 4. Help to maximize profitable credit sales while minimizing losses from bad debts. Accounts Payable:
  9. 9. Accounts payable systems keep track of data concerning purchases from and payments to suppliers. Accounts payable systems: 1. Prepare checks in payment of outstanding invoices and produce cash management reports. 2. Help ensure prompt and accurate payment of suppliers to maintain good relationships, ensure a good credit standing, and secure any discounts offered for prompt payment. 3. Provide tight financial control over all cash disbursements of the business. 4. Provide management with information needed for the analysis of payments, expenses, purchases, employee expense accounts, and cash requirements. Payroll: Payroll systems receive and maintain data from employee time cards and other work records. Accounts payable systems: 1. Produce paychecks and other documents such as earning statements, payroll reports, and labour analysis reports 2. Are prepared for management and government agencies. 3. Help businesses make prompt and accurate payments to their employees, as well as reports to management, employees, and government agencies concerning earnings, taxes, and other deductions. 4. Provide management with reports analysing labour costs and productivity. General Ledger: General ledger systems consolidate data from accounts receivable, accounts payable, payroll, and other accounting information systems. General ledger systems: 1. Produce the periodic financial statements and reports of the business. 2. Help businesses accomplish accounting tasks in an accurate and timely manner. 3. Typically provide better financial controls and management reports and involve fewer personnel and lower costs than manual accounting methods. 10-8 Financial Information Systems: [Figure 10.26] Computer-based financial information systems support financial managers in decisions concerning: 1. The financing of a business 2. The allocation and control of financial resources within a business. Major financial information system categories include: 1. Cash and securities management 2. Capital budgeting 3. Financial forecasting 4. Financial planning Case Management: Cash management systems collect information on all cash receipts and disbursements within a company on a realtime or periodic basis. Cash management systems: 1. Allow businesses to deposit or invest excess funds more quickly and thus increase the income generated by deposited or invested funds. 2. Produce daily, weekly, or monthly forecasts of cash receipts or disbursements (cash flow forecast) that are used to spot future cash deficits or surpluses. Online Investment Management: Many businesses invest their excess cash in short-term low-risk marketable securities or in higher return/higher risk alternatives, so that investment income may be earned until the funds are required. Online investment management services: 1. Help a financial manager make buying, selling, or holding decisions for each type of security so that an optimum mix of securities is developed that minimizes risk and maximizes investment income for the business. Capital Budgeting: The capital budgeting process involves evaluate the profitability and financial impact of proposed capital expenditures. This application makes heavy use of spreadsheet models that incorporate present value analysis of expected cash flows and
  10. 10. probability analysis of risk to determine the optimum mix of capital projects for a business. Financial Forecasting and Planning: A variety of financial forecasting packages provide analytical techniques that result in economic or financial forecasts of national and local economic conditions, wage levels, price levels, and interest rates. Financial Planning systems use financial planning models to evaluate the present and projected financial performance of a business or of one of its divisions or subsidiaries. Financial planning systems: 1. Help determine the financial needs of a business and analyze alternative methods of financing the business. 2. Use financial forecasts concerning the economic situation, business operations, types of financing available, interest rates, and stock and bond prices to develop an optimal financing plan for the business. 3. They frequently use electronic spreadsheet packages and DSS generators to build and manipulate models. 4. Are used to answer what-if and goal-seeking questions in order to evaluate financial and investment alternatives. SECTION II: Transaction Processing Systems 10-9 Transaction Processing: Transaction Processing Systems (TPS) are information systems that process data resulting from the occurrence of business transactions. Transactions are events that occur as part of doing business, such as sales, purchases, deposits, withdrawals, refunds, and payments. They play a vital role in supporting the operations of an organization. Strategic TPS Networks: Transaction processing systems can also play strategic roles in gaining competitive advantage for a business. For example, many firms are using the Internet, extranets, and other networks that tie them electronically to their customers or suppliers for realtime or online transaction processing (OLAP). Such systems, which capture and process transactions immediately, can help in: 1. Providing superior service to customers and other trading partners. 2. Adding value to products and services, and thus give them a company a way to differentiate themselves from their competitors. The Transaction Processing Cycle: [Figure 10.31] Transaction processing systems capture and process data describing business transactions. Then they update organizational files and databases, and produce a variety of information products for internal and external use. Five stage cycle of transaction processing systems involves: 1. Data entry activities 2. Transaction processing activities 3. File and database processing activities 4. Document and report generation 5. Inquiry processing activities. 10-10 Date Entry Process The input activity in TPS involves a data entry process. In this process, data is captured or collected by recording, coding, and editing activities. Trend: Move from traditional (manual) data entry systems toward source data automation (automated systems). The
  11. 11. reason for this trend is that direct methods are more efficient and reliable than manual systems. Traditional Data Entry: Traditional date entry methods typically rely on end users of an information system to: 1. Capturing data on paper source documents 2. Accumulating source documents into batches and transferring them to data entry staff for input. Problems with traditional data entry: 1. Requires too many activities, people and data media 2. High costs 3. Increased potential for errors. Source Data Automation: The use of automated methods of data entry is known as source data automation. Several methods have been developed in an attempt to reduce or eliminate problems encountered with the traditional method. Examples of devices used in source data automation include: 1. Point of Sale transaction terminals (POS) 2. ATM terminals (Automated Teller machines) 3. Optical character recognition (OCR) scanners and wands ∃ PCs and network computers with cash drawers as intelligent POS terminals ∃ Portable digital radio terminals and pen-based tablet PCs for remote date entry ∃ PCs equipped with touch screens and voice recognition systems for data entry. ∃ Bar coded tags ∃ Magnetic strip cards 10-11 Batch Processing: [Figure 10.34]: Transaction processing systems process data two basic ways: ∃ Batch Processing - Data is accumulated over a period of time and processed periodically. ∃ Real-time Processing - Data is processed immediately after a transaction occurs. This process is also known as online processing. Batch Processing In batch processing, transaction data is accumulated over a period of time and processed periodically. Batch processing usually involves: 1. Gathering source documents originated by business transactions. 2. Recording transaction data on some type of input medium 3. Sorting the transactions in a transaction file in the same sequence as the records in a sequential master file. 4. Processing transaction data and creating an updated master file and a variety of documents and reports. 5. Capturing and storing batches of transaction data at remote sites, and then transmitting it periodically to a central computer for processing. This is known as remote job entry (RJE). Advantages and Disadvantages (Batch Processing): Advantages of batch processing include: 1. Economical method when large volumes of transaction data must be processed. 2. Suited for many applications where it is not necessary to update databases as transactions occur. 3. Suited for applications where documents and reports are required only at scheduled intervals. Disadvantages of batch processing include: 1. Master files and periodic scheduled reports are frequently out-of-date between scheduled processing. 2. Immediate updated response too inquires cannot be made.
  12. 12. 10-12 Realtime Processing: In transaction processing systems, a realtime processing capability allows transaction data to be processed immediately after they are generated and can provide immediate output to end users. Full-fledged real-time systems for transaction processing are called online transaction processing (OLTP) systems. In realtime processing: 1. Transaction data are processed as soon as they are originated or recorded, without waiting to accumulate batches of data. 2. Data are fed directly into computer systems from online transaction terminals, and always stored online in direct access files. 3. Files and databases are always up-to-date since they are updated whenever data are originated, regardless of their frequency. 4. Responses to end users’ inquiries are immediate, since information stored on direct access devices can be retrieved almost instantaneously. 5. Realtime processing depends on the Internet, extranets, and other networks to provide telecommunications links between transaction terminals, client PCs, servers, and other computers. Fault Tolerant Processing: Fault tolerant computer systems are used to protect companies against failure of their strategic online transaction processing applications. They are used by organizations such as: Airlines, banks, and telephone companies. These computers provide a "nonstop" real-time transaction processing capability that allows them to continue operating even if parts of the system fail. Advantages and Disadvantages (Realtime Processing): Advantages of real-time processing include: 1. Realtime processing provides immediate updating of databases and immediate responses to user inquiries. 2. Realtime processing is particularly important for applications where a high frequency of changes must be made to a file during a short time to keep it updated. 3. Only the specific records affected by transactions or inquiries need to be processed, and several databases can be processed or updated concurrently. Disadvantages of realtime processing include: 1. Because of the online, direct-access nature of realtime processing networks, special precautions must be taken to protect the contents of databases (control logs or backup files). ∃ More controls have to be built into the software and network procedures to protect data from unauthorized access or the accidental destruction of data. ∃ Organizations with critical OLAP applications have to pay a high cost premium for the security of fault tolerant computer systems. 10-13 Database Maintenance: Database maintenance is a major activity of transaction processing systems. Databases must be maintained by its transaction processing systems so that they are always correct and up-to-date. One of the major functions of transaction processing systems is to update and make changes to an organization's corporate databases. These databases then provide the data resources that can be processed and used by information reporting systems, decision support systems, and executive information systems 10-14 Document and Report Generation: The final stage in the transaction processing cycle is the generation of information products such as documents and reports. Documents produced to transaction processing systems are called transaction documents.
  13. 13. Several major types of transaction documents include: ∃ Action Documents - Initiate actions or transactions on the part of their recipient. ∃ Information Documents - These documents relate, confirm, or prove to their recipients that transactions have occurred. ∃ Turnaround Documents - These documents are designed to be returned to the sender. Several major types of transaction reports and displays include: ∃ Control Listings - Detailed reports that describe each transaction occurring during a period. ∃ Edit Reports - Reports that describe errors detected during processing. ∃ Accounting Statements - Reports that legally document the financial performance or status of a business. 10-15 Inquiry Processing Transaction processing systems frequently support the realtime interrogation of online files and databases by end users. Inquiry processing capability can be provided by either batch or realtime processing. End users at client PCs and Ncs in a variety of networks can use database management query languages to make inquiries and receive responses concerning the results of transaction activity. Typically, responses are displayed in a variety of prespecified formats or screens.