Ch 9 Transaction Processing and ERP Systems

Principles of Information Systems, Seventh Edition 2

• An organization’s TPS must support the routine, day-to-day activities that occur in the normal course of business and help a company add value to its products and services


• TPSs help multinational corporations form business links with their business partners, customers, and subsidiaries• Walmart’s suppliers

• Identify the challenges that multinational corporations must face in planning, building, and operating their TPSs


• Implementation of an enterprise resource planning system enables a company to achieve numerous business benefits through the creation of a highly integrated set of systems


An Overview of Transaction Processing Systems

• A transaction processing system (TPS) provides data for other business processes

• Management information system/decision support system (MIS/DSS)

• Special-purpose information systems


Figure 9.1: TPS, MIS/DSS, and Special Information Systems in Perspective


An Overview of Transaction Processing Systems (continued)

• TPSs

• Process the detailed data necessary to update records about the fundamental business operations

• Include order entry, inventory control, payroll, accounts payable, accounts receivable, the general ledger, and more


Traditional Transaction Processing Methods and Objectives

• Batch processing system: method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch

• Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch


Figure 9.2: Batch Versus Online Transaction Processing


Traditional Transaction Processing Methods and Objectives (continued)

• Online entry with delayed processing: transactions are entered into the computer system when they occur, but they are not processed immediately

• Organizations expect their TPSs to:

• Process data generated for and about transactions

• Maintain a high degree of accuracy and integrity

• Produce timely documents and reports


Traditional Transaction Processing Methods and Objectives (continued)

• Organizations expect their TPSs to (continued):

• Increase labor efficiency

• Help provide increased service

• Help build and maintain customer loyalty

• Achieve competitive advantage


Transaction Processing Activities

• TPSs

• Capture and process data that describes fundamental business transactions

• Update databases

• Produce a variety of reports

• Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production


Figure 9.4: A Simplified Overview of a Transaction Processing System


Control and Management Issues

• Business continuity planning: identification of the business processes that must be restored first in the event of a disaster and specification of what actions should be taken and who should take them to restore operations

• Disaster recovery: actions that must be taken to restore computer operations and services in event of disaster


Transaction Processing System Audit

• 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?


Accounting Systems

• Budget

• Accounts receivable

• Payroll

• Asset management

• General ledger


Figure 9.16: Financial Systems


Accounting Systems (continued)

• Budget transaction processing system: automates many of the tasks required to amass budget data, distribute it to users, and consolidate the prepared budgets

• Accounts receivable system: manages the cash flow of the company by keeping track of the money owed the company on charges for goods sold and services performed



• Payroll system prepares:

• Payroll check and stub

• Payroll register

• W-2 statements

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



• General ledger system: designed to automate financial reporting and data entry


International Issues

• Issues that multinational corporations face in planning, building, and operating their TPSs

• Different languages and cultures

• Disparities in information system infrastructure

• Varying laws and customs rules

• Multiple currencies


Enterprise Resource Planning: An Overview

• Enterprise resource planning (ERP) systems are used in large, midsized, and small companies

• Real-time monitoring of business functions

• Timely analysis of key issues such as quality, availability, customer satisfaction, performance, and profitability


An Overview of Enterprise Resource Planning (continued)

• Steps in running a manufacturing organization using an ERP system

• Develop demand forecast

• Deduct demand forecast from inventory

• Determine what is needed for production

• Check inventory for needed raw materials


An Overview of Enterprise Resource Planning (continued)

• Steps in running a manufacturing organization using an ERP system (continued)

• Schedule production

• Assess need for additional production resources

• Financial forecasting


Advantages and Disadvantages of ERP

• Elimination of costly, inflexible legacy systems

• Improvement of work processes

• Increase in access to data for operational decision making

• Upgrade of technology infrastructure

• Expense and time in implementation


Advantages and Disadvantages of ERP (continued)

• Difficulty implementing change

• Difficulty integrating with other systems

• Risks in using one vendor

• Risk of implementation failure

Ch 9 Transaction Processing and ERP Systems

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