COMM 391
INTRODUCTION TO
ENTERPRISE SYSTEMS
Introduction to Management
Information Systems
Winter 2014 – Term 1
Learning Objectives
IT’s About Business – Pizza Pizza’s
Customer App
1. Explain the purposes of transaction

processing systems (TPS).
2. Define functional area information
systems.
3. Describe enterprise resource planning
(ERP) systems and their associated
benefits and challenges.
COMM 391 - W2014 Term 1
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Read the case “8.1 Pizza Pizza’s
Customer App” and answer the following
questions:
1. What are the advantages and disadvantages
of customer entry of pizza orders?
2. What are some of the features that you
would want on a pizza app? How would
these features result in costs or benefits for
Pizza Pizza?
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Learning Objective 1
Transaction Processing Systems

• Explain the purposes of transaction
processing systems (TPS).
 E.g. a product manufactured, a service sold, a person
hired, and a payroll cheque generated.

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A transaction is any business event that
generates data worth being captured and stored
in a database.
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How TPS Manage Data
Transaction processing system (TPS)
supports the monitoring, collection, storage and
processing of data generated by each of the
organization’s basic business transactions. The
data is input to the organization’s database.
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How TPS Manage Data (cont’d)
The database has to be protected from
errors resulting from overlapping or
concurrent updates.
 The database has to be protected against
inconsistencies arising from system
failure.
 A transaction must be reversible.
 An audit trail of transaction flow must be
available.

TPS must handle high volumes of data, avoid errors and
provide a highly secure and stable environment.
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Batch vs. Online Processing


Major Features of TPS
Batch processing – data are collected from
transactions as they occur and are placed in
groups or batches. The system then processes
the batch periodically.

 System response time is critical in TPS. System performance is
usually measured by the number of transactions they can
process in a given period of time.

On-line transaction processing (OLTP) –
business transactions are processed on-line as
soon as they occur. Also known as real-time
processing.
© 2014 – Y.M. Cheung
availability is the percentage of time that a given system is active
and working. What is the availability level of a typical system?
Acceptable Uptime (%)
95
99
99.9
99.99
99.999
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Major Features of TPS (cont’d)

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Average Downtime Per Month
36 hours
7 hours
43 minutes
4 minutes
26 seconds
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For discussion …
Data Integrity

 Data integrity refers to the overall completeness, accuracy and
consistency of data. It aims to prevent unintentional changes to
information.

Availability
 The system must be available whenever it is needed. System
Any
examples?
COMM 391 - W2014 Term 1
Performance
Ease of Use
What are the relationship between
Transaction Processing Systems and other
types of information systems?
 The system should be simple for users to understand, protect
them from data-entry errors as much as possible, and allow
them to easily correct their errors.

Modular Growth
 The system should be capable of growth at incremental costs,
rather than requiring a complete replacement. It should be
possible to add, replace or update hardware and software
components without shutting down the system.
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Types of Information Systems
Learning Objective 2
• Define functional area information
Expert System (ES)
systems.
Executive Information System (EIS)
Decision Support System (DSS)
Management Information System (MIS)
Transaction Processing System (TPS)
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Examples of Information Systems
Supporting the Functional Areas
Functional Area Information Systems
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Functional Area Information Systems
(FAIS) provide support for the various
functional areas (below) in an organization by
increasing each area’s internal efficiency and
effectiveness:
 Accounting
 Finance
 Marketing
 Operations
 Human Resources Management
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Problems Caused by the Isolation of
Functional Systems



Learning Objective 3
Functional Area Information Systems are
typically developed independently of one
another, resulting in “information silos” or islands
of automation.
These silos do not communicate well with one
another, thus making organization less efficient,
particularly in the business processes that
involve multiple functional area.
Data are duplicated because each application
has its own database.
COMM 391 - W2014 Term 1
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• Describe enterprise resource planning
(ERP) systems and their associated
benefits and challenges.
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ERP – What is it?
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

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Traditional IS in an Organization
Enterprise Resource Planning (ERP)
Often called “enterprise system”
Adopts a business process view of the
overall organization.
Integrates all departments and functions
throughout an organization into a single IT
system so that employees can make
enterprise-wide decisions by viewing
enterprise-wide information on all business
operations.
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Functional Silos
No Integration among application systems!
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The world before ERP for a manufacturing
firm
Problems
Manufacturing

Each time data re-entered, possibly with reformatting:
 Rekey: with and without mistakes
 Reformat: e.g. date format (month/date/year, date/month/year,
year/month/date)
Fulfillment

Small changes can delay the process:
 What if the credit manager increase the credit limit  Sales
Order Entry
person may need to go back to customer for more information/
change order
Credit
Payroll
 If the production plan prepared by the production manager is
Accounts
Receivable
inaccurate  Time and effort is increased
 Slower customer service cycles
 Takes longer to get out a bill
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ERP in an Organization
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ERP – How does it work?

ERP allows integration among different
systems (modules)
 Data sharing among different modules
 Joint execution among different modules
o Inputting data in one module triggers the execution
not only of that module but also all related
modules.
ERP evolved to include administrative, sales,
marketing, human resources processes.
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ERP Integrated Data Flows
Traditional ERP Modules (e.g. SAP ERP)
Accounting/Financials
• A/R and A/P
• Asset accounting
• Cash management
• General ledger
• Profitability analysis
• Financial consolidation
Operations & Logistics
• Inventory management
• Material req’t planning
• Materials Management
• Production planning
• Purchasing
• Shipping
Sales & Distribution
• Order management
• Pricing
• Sales management
• Sales planning
Human Resources
• Human-resource time
accounting
• Payroll
• Personnel planning
• Travel Expense

At the heart of all ERP systems is a database;
when a user enters or updates information in
one module, it is immediately and automatically
updated throughout the entire system.
Source: Davenport, T. H. “Putting the Enterprise into Enterprise Systems,”
Harvard Business Review, July-August 1998, pp. 121-131.
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The world after ERP for a manufacturing
firm
ERP Automated Process Flow
Sales
Credit
Fulfillment
Manufacturing
Accounts
Receivable
Payroll
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ERP Systems

ERP II Systems
An ERP system takes data from across the
enterprise, consolidates and correlates the data,
and generates enterprise-wide organizational
reports.
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IT’s About Business – Airgas
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1. What actions can a company such as Airgas
take to help ensure the successful
implementation of ERP software such as
SAP?
2. What benefits could a company such as
Airgas expect to receive from its deployment
of SAP?
© 2014 – Y.M. Cheung
Interorganizational ERP systems that provide
web-enabled links between a computer’s key
business systems and its customers, suppliers,
etc.
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IT’s About Business – Airgas
Read the case “8.2 SAP at Airgas” and
answer the following questions:
COMM 391 - W2014 Term 1

Airgas switched over its hard-goods
supply chain operation to SAP in July
2010:
 affects nearly every area of Airgas
 70 percent of its information systems
functional on SAP as of March 2013
 expected to have saved up to $125 million by
the end of 2013
 improved sales, better price management, and
leaner operating costs
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ERP Software Vendors

SAP ERP
Most organizations use commercially
available ERP software from major
vendors including:





SAP
Oracle
PeopleSoft
Microsoft
NetSuite
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Oracle ERP
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Microsoft Dynamics ERP
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NetSuite ERP
Benefits of ERP Systems

Organizational Flexibility and Agility
 ERP systems create a more agile company that adapts better
to change. ERP makes a company more flexible and less
rigidly structured so organizations operate more cohesively,
enhancing the business - internally and externally.

Decision Support
 ERP systems support upper level management by providing
information for decision making.

Quality and Efficiency
 ERP systems integrate and improve an organization’s business
processes, resulting in significant improvements in the quality
of customer service, production, and distribution.
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Limitations of ERP Systems
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Costs of ERP Systems
Companies may need to change existing
business processes to fit the predefined
business processes of the software (best
practices.)
Complex, expensive and time consuming to
implement.
Underestimating the complexity of the planning,
development and training required to prepare
for a new ERP system.
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
The cost of an ERP system:
 depends on the size and complexity of the software




package, which is a function of the size of the firm
includes new hardware required to run the system
includes consultant and business analyst fees
includes the time required for implementation
(disruption of business)
includes training costs (cost to develop and deploy
training plus employees time away from their job)
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For discussion …

Conclusion
Read the “Case 8.2 Difficulties in
Managing ERP Systems” and answer
the following questions:

Transaction Processing Systems (TPS) monitor,
store, collect, and process data generated from all
business transactions.

Functional Area Information Systems (FAIS) are
typically developed independently to support a
particular functional area within an organization,
resulting in “information silos”.

Enterprise Resource Planning (ERP) systems help
companies operate more efficiently and effectively
by combining all of an organization’s operational
data into one central core information system.
1. Describe what it means for an ERP system
to be inflexible?
2. Describe the pros and cons of tailoring your
organization’s business processes to align
with the procedures in an ERP system.
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