Transaction Processing, Electronic Commerce, and Enterprise Resource Planning Systems

Prof. Rushen Chahal

Prof. Rushen Chahal

TPS, MIS, DSS, and AI/ES

Hierarchy:
Information AI/ES DSS
Routine Decision support Input & output

Less

More

Less

More

MIS Data TPS More Less More

Sophistication & complexity of processing & analysis

Less

Prof. Rushen Chahal

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

Prof. Rushen Chahal

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 A system whereby each transaction is processed immediately, without the delay of accumulating transactions into a batch

On-line transaction processing (OLTP)

Prof. Rushen Chahal

Batch Schematic

Data entry of accumulated transactions

Input (batched)

Output

Prof. Rushen Chahal

On-line Schematic

Terminal Terminal Terminal

Output
Terminal

Immediate processing of each transaction

Terminal Terminal

Prof. Rushen Chahal

Integration of TPSs

Applications software

People

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Schematic
Prof. Rushen Chahal

Prof. Rushen Chahal

Objectives of TPS
Process data generated by and about transactions Maintain a high degree of accuracy Ensure data and information integrity and accuracy Produce timely documents and reports Increase labour efficiency Help provide increased and enhanced service Help build and maintain customer loyalty Achieve competitive advantage

Prof. Rushen Chahal

Simplified Overview of a Transaction Processing System

Schematic

Prof. Rushen Chahal

Data entry & input

Processing

Documents & reports

Documents: pick list

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

Database

cheques to vendors receiving notices paycheques Operational reports: finished product inventory status raw materials; packing materials; spare parts; inventory status

Prof. Rushen Chahal

Data Processing Activities Common to TPSs

A transaction processing cycle
Data collection Data editing Data correction Data manipulation Data storage Document production

Schematic

Prof. Rushen Chahal

Original data Data collection Data edit Data manipulation Data storage Document production Prof. Rushen Chahal

Data correction

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

Prof. Rushen Chahal

Point-of-Sale Transaction Processing System

Customers receipt UPC and quantity Inventory database Management information system Exception report

Point-of-sale transaction Scanner Quantity, processing Date, system time UPC UPC Price Item database

Item, quantity, date, time, price Purchases database

Prof. Rushen Chahal

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?

Prof. Rushen Chahal

Traditional TPS Order Processing

Order processing
Processing an order from entry to delivery, including traditional accounting transactions

Schematic

Prof. Rushen Chahal

Invoice Products Inventory status

Customer Customer order in person or via mail, phone, EDI, internet Order entry/ sales configuration Orders Planned shipments

Finished product inventory

Shipment planning Pick list Shipment execution

Routing Planned shipments & routes Scheduling

Shipped orders Invoicing

Prof. Rushen Chahal

Data Flow Diagram of an Order Entry System

Schematic

Prof. Rushen Chahal

D6 Inventory
Product numbers, inventory levels

D1 Products/prices
Products, price information 2. Verify product Orders numbers & stock on hand

D2 Customer payment history

Credit status Open orders

1. Collect order info

Orders

3. Authorize credit

D3 New orders

Rejected, partly filled orders Back orders Back orders

4. Notify customer

D4 Back orders

Customer

Customer notification

Rejected orders

D5 Rejected orders Prof. Rushen Chahal

Order Processing Support Systems Sales Configuration

Sales configuration
Ensures that products and services ordered are sufficient to accomplish customers objectives and will work well together

Prof. Rushen Chahal

Order Processing Support Systems Shipment Planning

Shipment planning
A system that determines which open orders will be filled and from which location they will be shipped E.g., (from Figure 8.9)
LOC 8 LINK 105 ITEM NUMBER 10 L1L16028 20 S8276 30 S8279 40 DESCRIPTION FASENTING TOOL STAPLE INCH STAPLE 1 INCH SHIPPING CHARGE 3 15 15 ORDERED EACH CASE CASE SHIPPED 3 15 12 BO

Prof. Rushen Chahal

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

Prof. Rushen Chahal

Order Processing Support Systems Inventory Control

Inventory control
A system that updates the computerized inventory records to reflect the exact quantity on hand of each stock keeping unit Status reports
Summarize all inventory items in stock, or shipped over a specified period of time

E.g., see Figure 8.10

Prof. Rushen Chahal

Order Processing Support Systems Invoicing

Invoicing
Generates customer invoices based on records received from the shipment execution TPS E.g., see Figure 8.11

Prof. Rushen Chahal

Order Processing Support Systems Customer Interaction System Customer interaction

A system that monitors and tracks each customer interaction with the company

Prof. Rushen Chahal

Customer

Request for proposal

Sale

Problem, idea, request for information

Other contacts

Customer interaction system Market research Product development

Sales Marketing

Quality control

Prof. Rushen Chahal

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

Prof. Rushen Chahal

Purchasing System

Schematic

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Employees

Purchase order request

Raw materials Packing materials Spare parts Inventory control Inventory control status report Purchase order processing Purchase order Receiving Material Supplier

Purchase order

Receiving notice Accounts payable

Invoice

Cheque

Prof. Rushen Chahal

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 organizations control over purchasing, improves cash flow increases profitability, and provides more effective management of current liabilities
Prof. Rushen Chahal

P.O. Example
(Click to view)

Prof. Rushen Chahal

Prof. Rushen Chahal

Accounting System
Accounting systems
Consist of
Budget Accounts receivable Accounts payable Payroll Asset management General ledger

Prof. Rushen Chahal

Accounts Payable Example

(Click to view)

Prof. Rushen Chahal

Prof. Rushen Chahal

Financial Systems

Schematic

Prof. Rushen Chahal

Customer

Asset management Cost of assets Accounts payable Amounts owed by company Amounts paid by company

Payments Accounts receivable Amounts owed by customers Amounts paid by customers

Payroll

Labour costs

General ledger Expense transactions Budget

Asset depreciation

Paycheques Time cards Customer

Prof. Rushen Chahal

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

Prof. Rushen Chahal

Statement of Account Example

(Click to view)

Prof. Rushen Chahal

Prof. Rushen Chahal

Financial Systems Accounts Receivable

Accounts receivable aging report
Tells managers what bills are overdue, either customer by customer or in a summary format

Prof. Rushen Chahal

Aging Report Example

(Click to view)

Prof. Rushen Chahal

Prof. Rushen Chahal

Financial Systems - Payroll

Payroll
Generates payroll checks and stubs, as well as W2 statements at the end of the year for tax purposes

Prof. Rushen Chahal

Financial Systems - Payroll

Payroll journal
Helps managers monitor total payroll costs for an organization and the impact of those costs on cash flow

Prof. Rushen Chahal

Financial Systems Asset Management

Asset management transaction processing system
A system that controls investments in capital equipment and manages depreciation for maximum tax benefits

Prof. Rushen Chahal

Financial Systems - General Ledger

Prof. Rushen Chahal

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

Prof. Rushen Chahal

Five Stage Model of E-Commerce

The stages consumers experience in the sales life cycle

Schematic

Prof. Rushen Chahal

Buyer Electronic distribution

Traditional delivery

5. After sales service

1. Search and Identify

4. Product & service delivery

2. Selection & negotiation

3. Purchasing

Prof. Rushen Chahal

Buying Over the Internet

Prepare list of items needed

Log on to internet

Access suppliers home page Fill out request for quotation form

Browse suppliers catalog

Input sent to suppliers order entry system

Place order

Review response to request for quotation

Pick items

Prof. Rushen Chahal

Forecasted Volume of E-Commerce

Mode Consumer Business

1997 $0.5 billion $8.0 billion

2000 $7 billion $66 billion

Prof. Rushen Chahal

Purchasing Products and Services Electronically

Establish credit with suppliers Secure E-commerce transactions
Secure financial transaction (SFT) SET = secure electronic transaction CyberCash

Prof. Rushen Chahal

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
Prof. Rushen Chahal

SET Discussion (2)

the merchant being able to see the number. The first applications based on SET are expected appeared in 1998.

Prof. Rushen Chahal

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

Prof. Rushen Chahal

ERP Examples
Software Vendor Avalon Software qad.inc Oracle SAP America Baan PeopleSoft J.D. Edwards Name of Product Avalon CIM MRG/PRO Oracle Manufacturing SAP R/3 Triton PeopleSoft World
Prof. Rushen Chahal

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

Prof. Rushen Chahal

SAP Three-Tier Client/Server Architecture

Database server

Application servers

Client desktop computers

Prof. Rushen Chahal

Business Application Programming Interface (BAPI)

Business processes Standard results Standard request for data or processing

BAPI (public interface) Results consistent with current version of SAP software SAP software Request for data or processing consistent with current version of SAP software

Prof. Rushen Chahal