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CHAPTER THREE: Business usage of information systems.

An Overview of transaction processing systems: Transaction Processing Systems (TPS): processes the detailed data necessary to update records about the fundamental business operations of the organisation. These systems include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger. The result of processing business transactions is that the organisations records are updated to reflect the status of the operation at the time of the last processed transaction. Traditional transaction processing methods and objectives: Batch processing systems: business transactions are accumulated over a period of time and prepared for processing as a single unit or batch. The time period during which transactions are accumulated is whatever length of time is needed to meet the needs of the users of that system. The essential characteristic is that there is some delay between the occurrence of the event and the eventual processing of the related transaction to update the orgs records. Online transaction processing(OLTP): each transaction is processed immediately, without the delay of accumulating transactions into a batch. As soon as the computer input is available, a computer program performs the necessary processing and updates the records affected by that single transaction. Online entry with delayed processing: a compromise between batch and online processing. With this type of system, transactions are entered into the computer system when they occur, but they are not processed immediately.

The true potential of info systems is in helping you and co-workers make more informed decisions. Table 3.1 READ Transaction processing activities: All TPSs perform a common set of basic data-processing activities. TPSs capture and process data that describes fundamental business transactions. Transaction processing cycle: includes data collection, data editing, data correction, data manipulation, data storage and document production. Page 94-95: Look at figures 3.3-3.5. Transaction Processing Cycle: Data Collection: The process of capturing and gathering all data necessary to complete transactions. Can be done manually, or collection is automated via special input devices. Begins with a transaction and results in origination of data that is input to the transaction processing system.

Uses source data automation (data captured at its source, recorded accurately in a timely fashion with minimal manual effort, in a form that can be directly entered into the computer). Data editing: an important step in the TP cycle performed for validity and completeness. Data correction: When invalid data is inputted, the system should also provide error messages to alert those responsible for the data editing function. Data correction involves reentering miskeyed/misscanned data that was found during data editing. Data manipulation: the process of performing calculations and other data transformations related to business transactions. Can include classifying data, sorting data into categories, performing calculations, summarising results, and storing data in the organisations database for further processing. Data storage: involves updating one or more databases with new transactions. Document production and reports: involves generating output records and reports. May be hard copy paper reports or displays on computer screens (soft copy).

Control and Management Issues: TPS are the backbone of any orgs info systems. They capture facts about the business operations of the org-facts without which orders cannot be shopped, customers cannot be invoiced, and employees and suppliers cannot be paid. Business continuity planning: identifies the business processes that must be restored first in the event of a disaster to get the businesss operations restarted with minimum disruptions. Disasters can be natural emergencies or interruptions in business processes such as labour unrest etc. Key actions can include safe evacuation, assessment of disaster impact, use of alternative equipment etc. One of the first steps of business continuity planning is to identify potential threats or problems. Disaster Recovery: focuses on the actions that must be taken to restore the computer operations and services in the event of a disaster. Includes providing for alternative computing and network facilities Transaction processing system audit: answers 4 basic questions: Does the system meet the business need for which it was implemented? What procedures and controls have been established? Are these procedures and controls being used properly? Are the information systems and procedures producing accurate and honest reports?

There are 2 types of audits: internal audits: conducted by the employees of an org. An external audit is performed by accounting firms/companies not associated with the org. In both types, the auditor inspects all programs, documentation, control techniques, the disaster plan, insurance

protection etc. In establishing the integrity of computer programs and software, and audit trail must be established. This allows the auditor to trace any output from the computer system back to the source documents. Traditional transaction processing applications: Order processing systems: include order entry, sales configuration, shipment planning, shipment execution, inventory control, invoicing, customer relationship mgmt., and routing and scheduling. Table 3.2 pg. 99. Purchasing transaction processing system: includes inventory control, purchase order processing, receiving, and accounts payable. Accounting systems: include the budget, accounts receivable, payroll, asset management, and general ledger. International issues: Businesses are increasingly operating across country borders or around the globe. Multinational corporations must address many issues and complexities in planning, building and operating their TPS. Different languages and cultures: It is difficult getting people from several countries who speak different languages and who were raised in different cultures to agree on a single work process. Despite these complications, many multinational companies are able to establish close connections with their business partners and create standard IS applications for all. Disparities in information system structure: lack of robust or a common information infrastructure can also create problems. Varying laws and custom rules: Numerous laws can affect the collection and dissemination of data. Trade custom rules between nations are international laws that set practices for two or more nations commercial transactions. They cover import/export , and the systems/procedures dealing with quotas, visas, entry documents, commercial invoices, foreign trade zones, payments of duties and taxes, and many other related issues. Multiple Currencies: A set of exchange rates is defined, and the information systems apply these rates to translate from one currency to another.

Enterprise resource planning (ERP): Is a set of integrated programs that manage a companys vital business operations for an entire multisite global organisation. A business process is a set of coordinated and related activities that takes one or more types of input and creates an output of value to the customer of the process. An overview of enterprise resource planning: evolved from materials requirement planning systems (MRP). The key to ERP is real time monitoring of the business functions, which permits

timely analysis of key issues such as quality, availability, customer satisfaction, performance and profitability. The key steps in running a manufacturing organisation using an ERP system is: Develop demand forecast: Begins with the preparation of a long term demand forecast. Prepared up to 18 months in advance. This may require special software modules, historical data related to shipments etc. Deduct demand forecast from inventory: As the forecasted demand is deducted from existing inventory to project future inventory levels, the system will display points at which additional finished products need to be produced. Determine what is needed for production: A bill of materials from each item to be produced is used to translate finished product requirements into detailed lists of requirements for raw materials and packaging materials, which will be needed to make and ship each finished product item. Check inventory for needed raw materials: The forecasted needs for raw materials and packaging materials are subtracted from the existing inventory of these items. Schedule production: The ERP production planning module uses the demand forecast and finished product inventory data to determine the week-by-week production schedules. Assess need for additional production resources: The production schedule may reveal interesting insights, eg. The need to hire additional workers, develop new suppliers. Financial forecasting: All the generated data can be fed into the financial module of the ERP system to prepare a profit and loss forecast statement to assess the firms future profitability. This profit forecast can be used to help establish new budget limits for the upcoming year. Lean manufacturing is a new manufacturing model some companies are considering to avoid problems with the demand-forecast approach just described. It aims to improve efficiency, eliminate product backlogs, and synchronise production to actual customer demand rather than long term forecast. In addition to finance and manufacturing, ERP systems can also support the HR, sales, and distribution functions.