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.

1. Prof. K. Adisesha

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

14. Batch Schematic
Data entry
of accumulated
transactions
Input
(batched)
Output
K. Adisesha 14

15. On-line Schematic
Output
Terminal
Terminal
Terminal
Terminal
Terminal
Terminal
Immediate
processing
of each
transaction
K. Adisesha 15

16. Integration of TPSs
Applications
software
People
Schematic
x n =
K. Adisesha 16

17. K. Adisesha 17

18. Simplified Overview of a
Transaction Processing System
Schematic
K. Adisesha 18

19. Data entry & input
Processing
Documents
& reports
Database
Internally
generated
transactions:
• 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
Documents:
• pick list
• cheques to vendors
• receiving notices
• paycheques
Operational reports:
• finished product
inventory status
• raw materials; packing
materials; spare parts;
inventory status
K. Adisesha 19

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

21. Data
collection
Data
edit
Data
manipulation
Data
storage
Document
production
Data
correction
Original data
K. Adisesha 21

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

23. Point-of-Sale Transaction
Processing System
Customer’s
receipt
Inventory
database
Management
information
system
Exception
report
Purchases
database
Scanner
Point-of-sale
transaction
processing
system
Item
database
UPC and
quantity
Item, quantity,
date, time, price
UPC Price
UPC
Quantity,
Date,
time
K. Adisesha 23

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

26. Customer
Order entry/
sales configuration
Shipment
planning
Routing
Scheduling
Shipment
execution
Invoicing
Finished
product
inventory
Customer order in person or via
mail, phone, EDI, internet
Orders
Planned
shipments
Planned
shipments
& routes
Pick list
Shipped orders
Inventory status
Products
Invoice
K. Adisesha 26

27. Data Flow Diagram of an Order
Entry System
Schematic
K. Adisesha 27

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

35. Request
for
proposal
Sale
Problem, idea,
request for
information
Other
contacts
Market
research
Sales
Marketing
Quality
control
Product
development
Customer
interaction
system
Customer
K. Adisesha 35

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

37. Purchasing System
Schematic
K. Adisesha 37

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

40. P.O. Example
 (Click to view)
K. Adisesha 40

41. K. Adisesha 41

42. Accounting System
 Accounting systems
 Consist of…
 Budget
 Accounts receivable
 Accounts payable
 Payroll
 Asset management
 General ledger
K. Adisesha 42

43. Accounts Payable Example
 (Click to view)
K. Adisesha 43

44. K. Adisesha 44

45. Financial Systems
Schematic
K. Adisesha 45

46. Customer
Accounts
receivable
Asset
management
Accounts
payable
Payroll
BudgetCustomer
General
ledger
Time
cards
Paycheques
Labour costs
Expense
transactions
Asset depreciation
Amounts owed by company
Amounts paid by company
Cost of assets
Payments
Amounts owed by customers
Amounts paid by customers
K. Adisesha 46

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

48. ‘Statement of Account’ Example
 (Click to view)
K. Adisesha 48

49. K. Adisesha 49

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

51. ‘Aging Report’ Example
 (Click to view)
K. Adisesha 51

52. K. Adisesha 52

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

56. Financial Systems - General Ledger
K. Adisesha 56

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

60. 4-60
In-House Logistics and Material
Management
Inventory Management
Quality Control

61. 4-61
Planning
Production/Operations
 Material Requirements Planning (MRP)
 Manufacturing Resource Planning (MRP II)
 Just-in-Time Systems
 Project Management
 Short-Term Schedules

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

73. 4-73
Recruitment
Position inventory
Employee selection
Using the Internet

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

88. Forecasted Volume of
E-Commerce
Mode 1997 2000
Consumer $0.5 billion $7 billion
Business $8.0 billion $66 billion
K. Adisesha 88

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
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97. End of TPS
Thank you
K. Adisesha 97