TRANSACTION
PROCESSING SYSTEM
TRANSACTION
 Is any business event that generates data worthy
of being captured and stored in a database.
 Examples of transactions are a product
manufactured, a service sold, a person hired and a
payroll check generated. When you check out at
SM, every time one of your purchases is swiped
over the bar code reader, that is one transaction.
TRANSACTION PROCESSING
SYSTEM
 monitor, collect, store, and process data generated
from all business transactions. These data are
inputs to the organization’s database.
 TPSs have to handle both high volume and large
variations in volume (for example, during peak
times) efficiently.
 In addition, they must avoid errors and downtime,
record results accurately and securely, and
maintain privacy and security.
 Avoiding errors is particularly critical, because data
from the TPSs are input into the organization’s
database and must be correct.
Actual process
 First, data are collected by people or sensors and
are entered into the computer via any input device.
 Generally speaking, organizations try to automate
the TPS data entry as much as possible because
of the large volume involved, a process called
source data automation.
 Next, the system processes data in one of two
basic ways: batch processing or online processing.
 In batch processing, the firm collects data from
transactions as they occur, placing them in groups
or batches. The system then prepares and
processes the batches periodically (say, every
night).
 In online transaction processing (OLTP), business
transactions are processed online as soon as they
occur.
 For example, when you pay for an item at a store,
the system records the sale by reducing the
inventory on hand by a unit, increasing the store’s
cash position by the amount you paid, and
increasing sales figures for the item by one unit—
by means of online technologies and in real time.
FUNCTIONAL AREA
INFORMATION SYSTEM
 provide information primarily to lower- and middle-level
managers in the various functional areas.
 Lower-level managers handle the day-to-day operations of
the organization, making routine decisions such as assigning
tasks to employees and placing purchase orders.
 Middle managers make tactical decisions, which deal with
activities such as short-term planning, organizing, and
control.
 Managers use this information to help plan, organize, and
control operations. The information is provided in a variety of
reports.
 Traditionally, information systems were designed within each
functional area. Their purpose was to support the area by
increasing its internal effectiveness and efficiency.
 Typical function-specific systems are accounting and finance,
marketing, production/operations (POM), and human
resources management.
Information Systems for
Accounting and Finance
 A primary mission of the accounting and finance functional
areas is to manage money flows into, within, and out of
organizations. This mission is very broad because money is
involved in all functions of an organization.
 We focus on certain selected activities of the
accounting/finance functional area.
Financial Planning and
Budgeting
 Appropriate management of financial assets is a major task
in financial planning and budgeting. Managers must plan for
both the acquisition of resources and their use.
 Financial and Economic Forecasting.
 Knowledge about the availability and cost of money is a key
ingredient for successful financial planning. Cash flow
projections are particularly important, because they tell
organizations what funds they need and when, and how they
will acquire them.
 Funds for operating organizations come from multiple
sources, including stockholders’ investments, bond sales,
bank loans, sales of products and services, and income from
investments.
 In addition, numerous software packages for conducting
economic and financial forecasting are available. Many of
these packages can be downloaded from the Internet, some
of them for free.
 Budgeting
 An essential part of the accounting/finance function is the
annual budget, which allocates the organization’s financial
resources among participants and activities.
 The budget allows management to distribute resources in the
way that best supports the organization’s mission and goals.
 Several software packages are available to support budget
preparation and control and to facilitate communication
among participants in the budget process. These packages
can reduce the time involved in the budget process.
 Managing Financial Transactions.
Many accounting/finance software packages are integrated
with other functional areas. For example, Peachtree by Sage
(www.peachtree.com) offers a sales ledger, purchase ledger,
cash book, sales order processing, invoicing, stock control,
fixed assets register, and more.
 Investment Management. Organizations invest large
amounts of money in stocks, bonds, real estate, and other
assets. Managing these investments is a complex task for
several reasons.
 First, there are literally thousands of investment alternatives,
and they are dispersed throughout the world.
 In addition, these investments are subject to complex
regulations and tax laws, which vary from one location to
another.
 Investment decisions require managers to evaluate financial
and economic reports provided by diverse institutions,
including federal and state agencies, universities, research
institutions, and financial services firms.
 In addition, thousands of Web sites provide financial data,
many of them for free.
 Control and Auditing. One major reason that organizations
go out of business is their inability to forecast and/or secure a
sufficient
cash
flow.
Underestimating
expenses
overspending, engaging in fraud, and mismanaging financial
statements can lead to disaster.
Information Systems for Marketing
 It is impossible to overestimate the importance of customers
to any organization.
 Therefore, any successful organization must understand its
customers’ needs and wants, and then develop its marketing
and advertising strategies around them. Information systems
provide numerous types of support to the marketing function.
Information Systems for
Production/Operations
Management
 The production and operations management (POM) function
in an organization is responsible for the processes that
transform inputs into useful outputs and for the operation of
the business.
 The POM function is also responsible for managing the
organization’s supply chain. Because supply chain
management is vital to the success of modern organizations.
 In-House Logistics and Materials Management.
 Logistics management deals with ordering, purchasing,
inbound logistics (receiving), and outbound logistics
(shipping) activities. Related activities include inventory
management and quality control.
 Inventory Management. Inventory management determines
how much inventory to keep. Overstocking can be expensive,
due to storage costs and the costs of spoilage and
obsolescence. However, keeping insufficient inventory is also
expensive (due to last-minute orders and lost sales).
 Operations personnel make two basic decisions: when to
order and how much to order. Inventory models, such as the
economic order quantity (EOQ) model, support these
decisions.
 A large number of commercial inventory software packages
are available that automate the application of these inventory
models.
 Many large companies allow their suppliers to monitor their
inventory levels and ship products as they are needed. This
strategy, called vendor-managed inventory (VMI).
 Quality Control. Quality-control systems used by
manufacturing units provide information about the quality of
incoming material and parts, as well as the quality of inprocess semifinished products and final finished products.
 These systems also generate periodic reports containing
information about quality (e.g., percentage of defects,
percentage of rework needed).