Chapter 9



Chapter 9

Transaction Processing and

Enterprise Resource Planning Systems

|At a Glance |

Instructor’s Manual Table of Contents

□ 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

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 |Page # |

|An Overview of Transaction Processing Systems |9-4 |

|Traditional Transaction Processing Applications |9-5 |

|Enterprise Resource Planning |9-6 |

Chapter Principles and Objectives

|Principles |Learning Objectives |

| | |

|An organization’s TPS must support the routine, day-to-day |Identify the basic activities and business objectives common to |

|activities that occur in the normal course of business and help a|all transaction processing systems. |

|company add value to its products and services. |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 |Identify the challenges the multinational corporations must face |

|their business partners, customers, and subsidiaries. |in planning, building, and operating their TPSs. |

| | |

|Implementation of an enterprise resource planning system enables |Define the term enterprise resource planning system and discuss |

|a company to achieve numerous business benefits through the |the advantages and disadvantages associated with the |

|creation of a highly integrated set of systems. |implementation of such a system. |

| | |

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 |Batch |

|Performing |On-line (OLTP) |

|Transaction |On-line with delayed processing |

|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)

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 |Order entry |

|Components: |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 |Inventory Control (raw materials, packing materials, spare parts, and supplies) |

|Components: |Purchase Order Processing |

| |Receiving |

| |Accounts Payable |

The accounting transaction processing system includes the following subsystems:

| | |

|Accounting |Budget |

|System Components: |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.

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.

Teaching Tips

• 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



Discussion Questions

Some interesting topics of discussion in this chapter include the following:

➢ 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.

Projects to Assign

1. Assign Review Questions: 1, 6, 9, 12, and 14.

2. Assign Problem Solving Exercise 1.

3. Assign Team Activity 1 or Web Exercise 2 or Case 1.

Key Terms

➢ 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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