An Overview of Transaction Processing
Systems
• Every organization has transaction processing
systems (TPSs), which process the detailed data
necessary to update fundamental business
operations of the organization.
• Automated 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.
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An overview of Transaction processing
systems
• 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 TPS
provides employees involved in other business
areas with data to help them achieve their goals.
TPS systems are often integrated under the
umbrella of an enterprise resource planning (ERP)
system.
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An Overview of Transaction Processing
Systems
• Provide data for other business processes:
– Management information system/decision support
system (MIS/DSS)
– Special-purpose information systems
• Process the detailed data necessary to update
records about the fundamental business operations
• Include order entry, inventory control, payroll,
accounts payable, accounts receivable, and the
general ledger.
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An Overview of Transaction Processing
Systems (continued)
Figure 5.6: TPS, MIS/DSS, and Special Information Systems in
Perspective
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Traditional Transaction Processing
Methods and Objectives
Transaction processing can be done in the
following ways
• 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
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Traditional Transaction Processing
Methods and Objectives (continued)
Figure 5.7: Batch Versus Online Transaction Processing
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Transaction Processing Activities
• All TPSs perform a common set of basic dataprocessing activities
• TPSs Capture and process data that describes
fundamental business transactions
This data is used to
- 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
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Transaction Processing Activities
(continued)
Figure 5.8: Data Processing Activities Common to TPSs
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Transaction Processing Activities
(continued)
• Data collection is the process of capturing and
gathering all data necessary to complete
transactions. Data collection begins with a
transaction and results in the origination of data that
is input to the transaction processing system.
– Should be collected at source
– Should be recorded accurately, in a timely fashion
– Source data automation
• Data editing is the process of checking data for
validity and completeness to detect any problems.
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Data Correction
• If invalid data is found during data editing, the
system should provide error messages that alert
those responsible for the data editing function. Error
messages must specify what problem is occurring
so that corrections can be made. A data correction
involves reentering miskeyed or misscanned data
that was found during data editing.
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Transaction Processing Activities
(continued)
• Data manipulation: is the process of performing
calculations and other data transformations related
to business transactions.
• Data manipulation can include sorting data,
performing calculation,….
• Data storage: is the process of updating one or
more databases with new transactions. Once the
databases have been updated, this data can be
further processed and manipulated by other systems
so that it is available for management decision
making.
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Document production and reports
• is the process of generating output records and
reports. These documents may be hard-copy paper
reports or displays on computer screens, which are
sometimes referred to as soft copy.
• Paychecks are example of hard copy documents
produced by a payroll TPS.
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Basic TPS Applications
Table 5.4: Systems That Support Order Processing
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Order Processing Systems
•
•
•
•
Order processing systems capture the basic data
needed for a customer to place an order and
comprise the following subsystems:
Order entry
Sales configuration
Shipment planning
Shipment execution
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Order Processing Systems (continued)
•
•
•
•
Inventory control
Invoicing and billing
Customer relationship management
Routing and scheduling
the business processes supported by these systems
are critical to the operation of the enterprise 
“lifeblood of the organization”
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Order Processing Systems (continued)
Figure 5.10: Order Processing Systems
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Purchasing and Accounting Systems
• Purchasing transaction processing systems include:
– Inventory control (raw materials, packing materials,
spare parts, and supplies)
– Purchase-order processing
– Receiving
– Accounts payable
This set of systems enables an organization to plan,
manage, track and pay for its purchases of raw
materials, parts, and services.
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Purchasing and Accounting Systems
(continued)
• Accounting transaction processing systems include:
– Budget
– Accounts receivable
– Payroll
– Asset management
– General ledger
This set of systems enables an organization to plan,
manage, track and control its cash flow and revenue.
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Purchasing and Accounting Systems
(continued)
Figure 5.11: Integration of a Firm’s TPSs
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Enterprise Resource Planning
• Enterprise resource planning (ERP) software is a set
of integrated programs that manages a company’s
vital business operations. 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.
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Enterprise Resource Planning: An
Overview of Enterprise Resource
Planning
• Enterprise resource planning (ERP) systems are
used in large, midsized, and small companies
• The key to ERO is Real-time monitoring of business
functions
• Permits Timely analysis of key issues, such as
quality, availability, customer satisfaction,
performance, and profitability
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An Overview of Enterprise Resource
Planning (continued)
•
Steps in running a manufacturing organization
using an ERP system:
1. Develop demand forecast: preparation of a long
term demand forecast (up to 18 months in advance).
Attempts to predict the weekly amount of each
product to be purchased over this time period.
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Steps in running a manufacturing
organization using an ERP system:
(continued)
2. Deduct demand forecast from inventory:
As the forecasted demand is deducted from existing
inventory to project future inventory levels, the
system will display points at which additional
finished products need to be produced.
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Steps in running a manufacturing
organization using an ERP system:
(continued)
3. Determine what is needed for production
A bill of materials for each item to be produced is used
to translate finished product requirements into
detailed lists of requirements for raw materials and
packaging materials, which will be required to make
and ship each finished product item.
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Steps in running a manufacturing
organization using an ERP system:
4. Check inventory for needed raw materials
the forecasted needs for raw materials and packaging
materials are subtracted from the existing inventory
of these items. The system displays purchases of
additional items required to meet production needs.
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Steps in running a manufacturing
organization using an ERP system
(continued):
5. Schedule production
the ERP production planning module uses the
demand forecast and finished product inventory data
to determine the week-by-week production
schedules.
6. Assess need for additional production resources
the production schedule may reveal the need to build
additional manufacturing capacity, hire additional
workers. These new requirements can be input into
the purchasing system and human resource
modules of the ERP system and be used by
managers in that area to develop future plans.
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Steps in running a manufacturing
organization using an ERP system
(continued):
7. Financial forecasting
All the generated data can be fed into the financial
module of the ERP system to prepare a profit and
loss forecast statement to assess the firm’s future
profitability. This profit forecast in turn can be used
to help establish new budget limits for the upcoming
year.
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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
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Advantages and Disadvantages of ERP
(continued)
•
•
•
•
Difficulty implementing change
Difficulty integrating with other systems
Risks in using one vendor
Risk of implementation failure
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Summary
• In business-to-consumer (B2C) e-commerce,
customers deal directly with the organization
• In business-to-business (B2B) e-commerce, the
participants are organizations
• In consumer-to-consumer (C2C) e-commerce, the
participants are individuals
• Supply chain management is composed of demand
planning, supply planning, and demand fulfillment
• Mobile commerce (m-commerce) uses wireless
devices to place orders and conduct business
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Summary (continued)
• Transaction processing systems (TPSs) process the
detailed data necessary to update records about the
fundamental business operations
• Transaction processing cycle: data collection, data
editing, data correction, data manipulation, data
storage, and document production
• Order processing TPSs: order entry, sales
configuration, shipment planning, shipment
execution, inventory control, invoicing, customer
relationship management, and routing and
scheduling
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Summary (continued)
• Purchasing TPSs: inventory control, purchase-order
processing, receiving, and accounts payable
• Accounting TPSs: budget, accounts receivable,
payroll, asset management, and general ledger
• Enterprise resource planning (ERP) systems permit
timely analysis of key issues, such as quality,
availability, customer satisfaction, performance, and
profitability
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