Principles of Information Systems, Sixth Edition
Chapter 9
Chapter 9
Transaction Processing and
Enterprise Resource Planning Systems
At a Glance
Instructor’s Manual Table of Contents
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Chapter Overview

Chapter Outline

Chapter Principles and Objectives

Teacher Notes

Quick Quizzes

Teaching Tips

Further Readings or Resources

Discussion Questions

Projects to Assign

Key Terms
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Principles of Information Systems, Sixth Edition
Chapter 9
Chapter Overview
Transaction processing was one of the first business processes to be computerized, and without information
systems, recording and processing business transactions would consume huge amounts of an organization’s
resources. A transaction processing system (TPS) provides employees involved in other business areas with
data to help them achieve their goals, and most consist of the following components: databases,
telecommunications, people, procedures, software, and hardware. These components are organized to
perform the basic TPS functions of data collection, data editing, data correction, data manipulation, data
storage, and document production. TPS systems are often integrated under the umbrella of an enterprise
resource planning (ERP) system.
Chapter Outline
Lecture Topics
An Overview of Transaction Processing
Systems
Traditional Transaction Processing
Applications
Enterprise Resource Planning
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Principles of Information Systems, Sixth Edition
Chapter 9
Chapter Principles and Objectives
Principles
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.
Learning Objectives
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Identify the basic activities and business
objectives common to all transaction processing
systems.
Describe the inputs, processing, and outputs for
the transaction processing systems associated
with order processing.
Describe the inputs, processing, and outputs for
the transaction processing systems associated
with purchasing.
Describe the inputs, processing, and outputs for
the transaction processing systems associated
with accounting business processes.
TPSs help multinational corporations form business
links with their business partners, customers, and
subsidiaries.

Identify the challenges the 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.

Define the term enterprise resource planning
system and discuss the advantages and
disadvantages
associated
with
the
implementation of such a system.
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Principles of Information Systems, Sixth Edition
Chapter 9
Teacher Notes
An Overview of Transaction Processing Systems
Every organization has manual and automated transaction processing systems (TPSs), which process the
detailed data necessary to update fundamental business records. TPSs consist of hardware, software,
procedures, telecommunications, databases, and people. These components are organized to support the
basic TPS processes of data collection, data editing, data correction, data manipulation, data storage, and
document production.
Transaction processing can be done in the following ways:
Methods for
Performing
Transaction
Processing:
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Batch
On-line (OLTP)
On-line with delayed processing
Organizations expect TPSs to accomplish a number of specific objectives including: processing data
generated by, and about transactions; maintaining a high degree of accuracy; ensuring data and information
integrity and accuracy; compiling timely reports and documents; increasing labor efficiency; helping
provide increased and enhanced service; and building and maintaining customer loyalty.
TPSs are the backbone of an organization’s information system and as a result, it is essential that they be
reliable. As such, activities such as business resumption planning and disaster recovery play key roles in
TPS implementation and use.
Quick Quiz
1.
True or False: A TPS uses less sophisticated processing than other types of organizational
computing.
ANSWER: True
2.
What type of TPS waits until a number of transactions are accumulated before processing
them?
ANSWER: Batch
3.
What type of TPS processes transactions as they occur?
ANSWER: On-line transaction processing systems (OLTP)
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Principles of Information Systems, Sixth Edition
Chapter 9
Traditional Transaction Processing Applications
Transaction processing applications permeate an organization. From order entry to purchasing and from
payroll to accounting, nearly every fundamental business process relies on transaction processing. Order
processing systems capture the basic data needed for a customer to place an order and are comprised of the
following subsystems:
Order Entry
System
Components:
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Order entry
Sales configuration
Shipment planning
Inventory control (finished product)
Invoicing and billing
Customer interaction
Routing and scheduling
The purchasing transaction processing system includes the following subsystems:
Purchasing
System
Components:
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Inventory Control (raw materials, packing materials, spare parts, and supplies)
Purchase Order Processing
Receiving
Accounts Payable
The accounting transaction processing system includes the following subsystems:
Accounting
System
Components:
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Budget
Accounts Receivable
Payroll
Asset Management
General Ledger
Businesses are increasingly operating across country borders or around the globe. As a result, numerous
complications arise that multinational corporations must address in planning, building, and operating their
TPSs. Different languages and cultures, disparities in information system infrastructure, varying laws and
customs rules, and multiple currencies are among the challenges of linking all the business partners,
customers, and subsidiaries of a multinational company.
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Chapter 9
Quick Quiz
1.
What are the three main areas for TPS applications?
ANSWER: Accounting, purchasing, and order entry.
2.
What is a financial plan that identifies items and dollar amounts that the organization
estimates it will spend?
ANSWER: Budget
3.
What system captures the basic data needed to process a customer order?
ANSWER: Order entry system
4.
What ensures that products and services ordered are sufficient to accomplish the customer's
objectives?
ANSWER: Sales configuration system.
Enterprise Resource Planning
Enterprise resource planning (ERP) software is a set of integrated programs that manage a company’s vital
business operations. It must be able to support multiple legal entities, multiple languages, and multiple
currencies. Although the scope of an ERP system may vary from vendor to vendor, most provide integrated
software to support manufacturing and finance. In addition to these core business processes, some ERP
systems are capable of supporting additional business functions such as human resources, sales, and
distribution.
The primary benefits of implementing ERP include elimination of inefficient systems, easing adoption of
improved work processes, improving access to data for operational decision making, and technology
standardization. Note however, that although ERP offers many strategic advantages by streamlining a
company’s transaction processing system, it is time-consuming, difficult, and expensive to implement.
A popular ERP platform is SAP's R/3 which has been called the most complex software package ever
written for use in a corporation, as it integrates all corporate data in a single unified database yet remains
flexible enough to satisfy a wide variety of corporate needs.
Quick Quiz
1.
True or False: An ERP system falls short when an organization requires multi-language
support.
ANSWER: False
2.
True or False: ERP systems are only used by very large corporations.
ANSWER: False
3.
What are the most efficient and effective ways to complete a business process called?
ANSWER: Best practices.
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Chapter 9
Teaching Tips
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Invite a speaker in from an organization using a TPS.
Invite a sale representative from an ERP company in to speak.
Demonstrate a simple barcode system.
Use the Internet to visit a variety of ERP vendor's Web sites.
Bring in a data recovery plan from a local business.
Further Readings or Resources
Readings
Norris, G., J. Dunleavy, J. Hurley, J. Balls, and K. Hartley. 2000. E-Business and ERP: Transforming the
Enterprise, John Wiley & Sons.
Welti, N. 1999. Successful SAP R3 Implementation: Practical Management of ERP Projects. Addison
Addison-Wesley Pub Co.
Informational on-line sites
ERP
http://www.erp.com
Discussion Questions
Some interesting topics of discussion in this chapter include the following:
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Discuss the reason why transaction processing systems cannot have downtime.
Discuss the various transaction processing systems being used by students on a daily basis.
Discuss the business resumption plans that have been put in place for the university.
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Projects to Assign
1.
2.
3.
Assign Review Questions: 1, 6, 9, 12, and 14.
Assign Problem Solving Exercise 1.
Assign Team Activity 1 or Web Exercise 2 or Case 1.
Key Terms
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Audit trail - documentation that allows the auditor to trace any output from the computer system
back to the source documents.
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.
Best practices - the most efficient and effective ways to complete a business process.
Business resumption planning - the process of anticipating and providing for disasters.
Data collection - the process of capturing and gathering all data necessary to complete
transactions.
Data correction - the process of reentering miskeyed or mis-scanned data that was found during
data editing
Data editing - the process of checking data for validity and completeness.
Data manipulation - the process of performing calculations and other data transformations
related to business transactions.
Data storage - involves updating one or more databases with new transactions.
Disaster recovery - the implementation of the business resumption plan.
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