Transaction Processing, Electronic Commerce, and Enterprise Resource Planning Systems

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Chapter 8
Transaction Processing, Electronic Commerce, and
Enterprise Resource Planning Systems
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TPS, MIS, DSS, and AI/ES

• Hierarchy

AI/ES
Information
Less
More
Less
More
DSS
Sophistication complexity ofprocessing
analysis
Decisionsupport
Input output
Routine
MIS
TPS
Data
More
More
Less
Less
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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

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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

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Batch Schematic
Data entryof accumulatedtransactions
Input (batched)
Output
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On-line Schematic
Terminal
Terminal
Terminal
Output
Immediateprocessingof eachtransaction
Terminal
Terminal
Terminal
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Integration of TPSs
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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

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Simplified Overview of aTransaction Processing
System
Schematic
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Data entry input
Processing
Documents reports

• Documents
• pick list
• cheques to vendors
• receiving notices
• paycheques
• Operational reports
• finished product inventory status
• raw materials packing materials spare parts
  inventory status

Database

• Internally generatedtransactions
• 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

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Data Processing Activities Common to TPSs

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

Schematic
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Original data
Datacollection
Dataedit
Datamanipulation
Datacorrection
Datastorage
Documentproduction
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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

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Point-of-Sale Transaction Processing System
Customersreceipt
Inventorydatabase
Exceptionreport
Managementinformationsystem
UPC andquantity
Point-of-saletransactionprocessingsystem
UPC
Scanner
Quantity, Date, time
Item, quantity, date, time, price
Purchasesdatabase
UPC
Price
Itemdatabase
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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?

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Traditional TPS Order Processing

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

Schematic
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Customer
Invoice
Products
Customer order in person or viamail, phone, EDI,
internet
Order entry/ sales configuration
Inventory status
Orders
Plannedshipments
Shipmentplanning
Routing
Finishedproductinventory
Plannedshipments routes
Pick list
Shipmentexecution
Scheduling
Shipped orders
Invoicing
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Data Flow Diagram of an Order Entry System
Schematic
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D1
Products/prices
D2
Customer payment history
D6
Inventory
Product numbers,inventory levels
Products, priceinformation
Credit status
2. Verify product numbers stock on hand
Openorders
3. Authorizecredit
1. Collect order info
Orders
Orders
D3
New orders
Rejected,partly filled orders
Backorders
4. Notify customer
Back orders
D4
Back orders
Customer
Customer notification
Rejectedorders
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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

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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 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
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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

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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

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Order Processing Support Systems - Invoicing

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

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Order Processing Support Systems - Customer
Interaction System

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

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Customer
Requestforproposal
Sale
Problem, idea, request for information
Othercontacts
Customerinteractionsystem
Marketresearch
Productdevelopment
Sales
Qualitycontrol
Marketing
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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

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Purchasing System
Schematic
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Raw materialsPacking materialsSpare
partsInventory control
Inventory controlstatus report
Purchaseorder request
Purchase orderprocessing
Employees
Purchaseorder
Purchaseorder
Receiving
Supplier
Material
Invoice
Receivingnotice
Accountspayable
Cheque
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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

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P.O. Example

• (Click to view)

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Accounting System

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

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Accounts Payable Example

• (Click to view)

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Financial Systems
Schematic
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Customer
Assetmanagement
Cost of assets
Payments
Accountspayable
Accountsreceivable
Amounts owed by companyAmounts paid by company
Amounts owed by customersAmounts paid by
customers
Payroll
Generalledger
Labour costs
Asset depreciation
Paycheques
Expense transactions
Timecards
Customer
Budget
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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

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Statement of Account Example

• (Click to view)

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Financial Systems Accounts Receivable

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

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Aging Report Example

• (Click to view)

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Financial Systems - Payroll

• Payroll
• Generates payroll checks and stubs, as well as
  W-2 statements at the end of the year for tax
  purposes

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Financial Systems - Payroll

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

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Financial Systems - Asset Management

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

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Financial Systems - General Ledger
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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

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Five Stage Model of E-Commerce

• The stages consumers experience in the sales life
  cycle

Schematic
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Buyer
Electronicdistribution
Traditionaldelivery
1. Search and Identify
5. After sales service
2. Selection negotiation
4. Product service delivery
3. Purchasing
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Buying Over the Internet
Prepare list of items needed
Log on to internet
Access suppliers home page
Browse suppliers catalog
Input sent to suppliers order entry system
Pick items
Fill out request for quotation form
Review response to request for quotation
Place order
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Forecasted Volume of E-Commerce
Mode 1997 2000
Consumer 0.5 billion 7 billion
Business 8.0 billion 66 billion
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Purchasing Products and Services Electronically

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

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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

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SET Discussion (2)

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

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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

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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
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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

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SAP Three-Tier Client/Server Architecture
Databaseserver
Applicationservers
Clientdesktopcomputers
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Business Application Programming Interface (BAPI)
Businessprocesses
Standard requestfor data or processing
Standard results
BAPI(public interface)
Request for data or processing consistentwith
current version of SAP software
Results consistent with currentversion of SAP
software
SAP software
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End of Chapter 8
Chapter 9