Week 12

The transaction processing system (TPS)

A transaction is any business-related exchange such as payments to employees, sales
to customers, or payments to suppliers.
A transaction processing system (TPS) is an organized collection of people,
procedures, software, databases, and devices to perform and record business
operations and functions.

Many organizations employ transaction processing systems (TSPs), which capture and
process the detailed data necessary to update records about the fundamental business
operations of the organization. The result of processing business transactions is that the
organization’s records are updated to reflect the status of the operation at the time of
the last processed transaction.

💡 We can say TPS is an updating system that regularly updates the

organization’s information system (IS).

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 💡 TPS’s, however, don’t provide much support for decision making.

Traditional transaction processing methods and

objectives
Batch processing systems
With batch processing systems, business transactions are accumulated over a period
of time and prepared for processing as a single unit or batch.
Example: the market waits until midnight to calculate the day’s income.

📖 Batch - group

Online transaction processing system (OLTP)

In the online transaction processing system (OLTP), each transaction is processed
immediately without the delay of accumulating transactions into a batch. Consequently,
at any time, the data in an online system reflects the current status.

Example: airline ticket systems, information has to be processed immediately.

Customers would see data about the empty or full seats.

An enterprise system is central to individuals and organizations of all sizes and ensures
that information can be shared across all business functions and all levels of
management to support the running and managing of a business.

Enterprise Resource Planning (ERP)

An enterprise resource planning (ERP) system is a set of integrated programs that
manage the vital business operations for an entire multisite, global organization. An
ERP system can replace many applications with one unified set of programs, making
the system easier to use and more effective.

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 Advantages of ERP
Increased global competition, new needs of executives for control over the total cost
and product flow through their enterprises, and ever more numerous customer
interactions drive the demand for enterprise-wide access to real-time information.

Decision-making as a component of problem-solving

Problem-solving is a critical activity for any business organization it is generally
accepted that problem-solving ability differs dramatically from one person to the next
with some people having good problem-solving skills, while others do not.
A well-known model developed by Herbert Simon divides the decision-making phase of
the problem-solving process into three stages: intelligence, design, and choice.

Intelligence stage
During this stage, you identify and define potential problems or opportunities. You also
investigate resource and environmental constraints.

Design stage
You develop alternative solutions to the problem and evaluate their feasibility.

The choice stage

Requires selecting a course of action.

Implementation
The solution is put into effect

Monitoring
In this stage, decision-makers evaluate the implementation to determine whether the
anticipated results were achieved and to modify the implementation if needed

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 Programmed versus Nonprogrammed Decisions
In the choice stage, various factors influence the decision maker’s selection of a
solution. One factor is whether the decision can be programmed.

Programmed decisions
Programmed decisions are routine and repetitive decisions. Often a rule, procedure,
or quantitative method is employed to make these kinds of decisions.
It can be programable with an IS and everything will be done autonomously and
repetitively.

Nonprogrammed decisions
Nonprogrammed decisions are typically one-time decisions that in many cases are
difficult to quantify. Unique and complex that required human judgment.

Structured, Semistructured, and Unstructured

Decisions
Structured decisions are ones where the variables that comprise the decision are
known and can be measured quantitatively.

Unstructured decisions are ones where the variables that affect the decision cannot
be measured quantitatively.

Semistructured decisions are ones where only some of the variables can be
measured quantitatively.

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 📖 Quantity - the amount or number of a material or abstract thing not usually
estimated by spatial measurement.
Quantitatively - in a way that uses or involves numbers, calculations,
measurements, or quantities: We use mathematical models to
quantitatively predict our experimental results.

Optimizing, Satisificing, and Heuristic Approaches

An optimization model finds the best solution, the one that will best help the
organization meet its goals. A limit on the number of available work hours in a
manufacturing facility is an example of a problem constraint.

📖 Facility - a place, amenity, or piece of equipment provided for a particular

purpose.

A satisficing model is one that finds a good — but not necessarily the best — solution
to a problem. Satisficing is used when modeling the problem properly to get an optimal
decision would be too difficult, complex, or costly.

Heuristics, also known as “rules of thumb,” are commonly accepted guidelines or

procedures that experience has shown usually lead to a good solution. These rule-of-
thumb strategies shorten decision-making time and enable people to function without
constantly deliberating over the course of action to take. While heuristics are helpful in
many situations, they can also lead to biases(önyargı) and place too much emphasis on
the past.

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 Management Information System (MIS)
Management information systems in perspective
The primary purpose of an MIS is to help an organization achieve its goals by providing
managers with insight into the regular operations of the organization so that they can
control, organize, and plan more effectively. One important role of MIS is to provide the
right information to the right person in the right format at the right time.

Inputs to a Management Information systems

Internal:

TPS

ERP

Databases

External:

Customers

Suppliers

Competitors

Stockholders

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 whose data is not already captured by the TPS and enterprise systems, as well as other
sources, such as the Internet.

Outputs of a Management Information System

The output of most MISs is a collection of reports that are disturbed to managers. Many
MIS reports are generated using the data in an organization’s databases. These reports
can be tailored for each user and can be delivered in a timely fashion.

Decision Support Systems (DSS)

A decision support system (DSS) is an organized collection of people, procedures,
software, databases, and devices used to help make decisions that solve problems. The
focus of a DSS is on decision-making effectiveness when faced with unstructured or
semistructured business problems. Decision support systems offer the potential to
generate higher profits, lower costs, and better products and services.

Characteristics of a Decision Support System

Provide rapid access to information.

Provide report and presentation flexibility.

Offer both textual and graphical orientation.

Support drill-down analysis.

Perform sophisticated, complex analyses and comparisons using advanced

software packages.

Support optimization, satisficing, and heuristic approaches.

Perform simulation analyses.

Forecast a future opportunity or problem.

Capabilities of a Decision Support System

More flexible than MIS

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 A Comparison of DSS and MIS
A DSS differs from an MIS in numerous ways, including the type of problems solved, the
support given to users, the decision emphasis and approach, and the type, speed,
output, and development of the system used.

Knowledge Management Systems

Knowledge is the awareness and understanding of a set of information and the ways
that information can be made useful to support a specific task or reach a decision.

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 A knowledge management system (KMS) is an organized collection of people,
procedures, software, databases, and devices used to create, store, share, and use the
organization’s knowledge and experience. KMSs cover a wide range of systems, from
software that contains some KMS components to dedicated systems designed
specifically to capture, store, and use knowledge.

Oreview of Knowledge Management Systems

Knowledge can be of two types—explicit and tacit knowledge. Explicit knowledge is
objective and can be measured and documented in reports, papers, and rules. Tacit
knowledge, on the other hand, is hard to measure and document and typically is not
objective or formalized. Many organizations actively attempt to convert tacit knowledge
to explicit knowledge to make knowledge easier to measure, document, and share with
others.

The Chief Knowledge Officer (CKO) is the individual who represents the
organization’s knowledge management vision with clarity and effectiveness, strives
mightily to achieve that vision, provides executive-level leadership to implement and
sustain KM, and is the ultimate focal point for knowledge creation, sharing, and
application.

Artificial Intelligence (AI)

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 💡 At a Dartmouth College conference in 1957, John McCarthy proposed the
use of the term artificial intelligence (AI) to describe computers with the ability
to mimic or duplicate the functions of the human brain.

Artificial Intelligence systems include the people, procedures, hardware, software,

data, and knowledge needed to develop computer systems and machines that can
simulate human intelligence processes, including learning, reasoning, and self-
correction.

Nature of Intelligence
From the early AI pioneering stage, the research emphasis has been on developing
machines with the ability to “learn” from experience and apply knowledge acquired from
those experiences; to handle complex situations; to understand visual images, process
and manipulate symbols, be creative and imaginative; and to use heuristics, which
together is considered intelligent behavior.

The Turing Test was designed by Alan Turing, a British mathematician. it attempts to
determine whether a computer can successfully impersonate humans via an instant
messaging system and the only information following between the contestants and
judges in the text.

Some of the specific characteristics of intelligent behavior include the ability to do the
following:

Learn from experience and apply the knowledge acquired from experience.

Handle complex situations.

Solve problems when important information is missing.

Determine what is important.

React quickly and correctly to a new

situation.
20Q
20Q is an online game
Understanding visual images.

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 Process and manipulate symbols. where users play the popular
Be creative and imaginative. game, 20 Questions, against
Use heuristics. an artificial intelligence

Brain-Computer Interface (BCI)

Developing a link between the human and the computer is another exciting area that
touches all aspects of artificial intelligence. Called Brain-Computer Interface (BCI), the
idea is to directly connect the human brain to a computer and have human thought
control computer activities.
Locked-in Syndrome

Major Branches of Artificial Intelligence

Expert systems
An expert system consists of hardware and software that stores knowledge and makes
inferences, enabling a novice to perform at the level of an expert.

Robotics
Robotics involves developing mechanical or computer devices that can paint cars, make
precision welds, and perform other tasks that require a high degree of precision or are
tedious or hazardous for human beings.

Vision Systems
Vision Systems include hardware and software that permit computers to capture, store,
and process visual images.

Natural Language Processing and Voice Recognition

Natural Language Processing involves the computer understanding, analyzing,
manipulating, and/or generating “natural” languages such as English.

Learning systems

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 Learning systems are a combination of software and hardware that allows a computer
to change how it functions or how it reacts to situations based on feedback received.

Reinforcement learning is a learning system involving sequential decisions with learning

taking place between each decision. The process often called dynamic programming, is
repeated until it is impossible to make improvements in the decision.

Neural Networks
A neural network is a computer system that can recognize and act on patterns or trends
that it detects in large sets of data.

Other artificial Intelligence systems

A genetic algorithm is an approach to solving problems based on the theory of evolution
that uses the survival of the fittest concept as a problem-solving strategy.

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