MIS : Session 2

The Tata Nano Makes History Using

Digital Manufacturing
 Problem: Outdated manufacturing processes,
time-consuming manual labor.
 Solutions: Digital manufacturing systems
allowed Tata to create a $2,500 car without
sacrificing safety or value.
 Dassault Systems’ Digital Enterprise Lean
Manufacturing Interactive Application drastically
reduced development cycle.
 Demonstrates IT’s role in fostering innovation
and improving efficiency.
 Illustrates the benefits of updating
manufacturing-related business processes
Business Processes and Information
Systems
• Business processes:
• Workflows of material, information, knowledge
• Sets of activities, steps
• May be tied to functional area or be cross-
functional
• Businesses: Can be seen as collection of business
processes
• Business processes may be assets or liabilities
Business Processes and Information
Systems
 Examples of functional business processes
 Manufacturing and production
 Assembling the product
 Sales and marketing
 Identifying customers
 Finance and accounting
 Creating financial statements
 Human resources
 Hiring employees
The Order Fulfillment Process

Fulfilling a customer order involves a complex set of steps that

requires the close coordination of the sales, accounting, and
manufacturing functions.
Business Processes and Information
Systems
• Information technology enhances
business processes in two main ways:

• Increasing efficiency of existing processes

• Automating steps that were manual

• Enabling entirely new processes that are

capable of transforming the businesses
• Change flow of information
• Replace sequential steps with parallel steps
• Eliminate delays in decision making
 KINDS OF INFORMATION SYSTEMS

KIND OF SYSTEM GROUPS SERVED

STRATEGIC LEVEL SENIOR MANAGERS

MANAGEMENT LEVEL MIDDLE MANAGERS

KNOWLEDGE LEVEL KNOWLEDGE &

DATA WORKERS

OPERATIONAL OPERATIONAL
LEVEL MANAGERS

SALES & MANUFACTURING FINANCE ACCOUNTING HUMAN

MARKETING & ENGINEERING RESOURCES
 Four General Kinds of IS
 Operational-level systems
 support operational managers by monitoring the day-to-day’s
elementary activities and transactions of the organization. e.g. TPS.
 Knowledge-level systems
 support knowledge and data workers in designing products,
distributing information, and coping with paperwork in an
organization. e.g. KWS, OAS
 Management-level systems
 support the monitoring, controlling, decision-making, and
administrative activities of middle managers. e.g. MIS, DSS
 Strategic-level systems
 support long-range planning activities of senior management. e.g.
ESS
A Framework for IS
(with respect to support provided)
• Executive Support Systems (ESS)
• Management Information Systems (MIS)
• Decision Support Systems (DSS)
• Knowledge Work Systems (KWS)
• Office Automation Systems (OAS)
• Transaction Processing Systems (TPS)

9
Relationship of systems to one another
Executive
support
system

Management Management
System System
(MIS) (DSS)

Knowledge Transaction
Systems Processing
(KWS and System
Office system (TPS)
TRANSACTION PROCESSING
SYSTEM (TPS)
Transactions
 Transactions…
 Basic business operations such as customer orders, purchase orders,
receipts, time cards, invoices, and payroll checks in an organization
 Transaction processing systems (TPS)
 Perform routine operations and serve as a foundation for other
systems
 Transaction processing systems
 Perform and record daily routine transactions
necessary to conduct business
 Examples: sales order entry, payroll, shipping
 Allow managers to monitor status of operations and
relations with external environment
 Serve operational levels
 Serve predefined, structured goals and decision
making
Transaction Processing Systems (TPS)

Computerized system that performs and records the daily

routine transactions necessary to conduct the business;
these systems serve the operational level of the
organization

• TYPE: Operational-level
• INPUTS: transactions, events
• PROCESSING: updating
• OUTPUTS: detailed reports
• USERS: operations personnel, supervisors
• DECISION-MAKING: highly structured

EXAMPLE: payroll, accounts payable

A Payroll TPS

A TPS for payroll processing captures employee payment transaction data (such as a
time card). System outputs include online and hard-copy reports for management
and employee paychecks.
 Typical Applications of TPS
TYPE OF TPS SYSTEM
Sales/ Manufacturing! Finance/ Human Other types
marketing production accounting resources (e.g., university)
systems systems systems systems
Major functions Sales management Scheduling Budgeting Personnel recard Admissions
of system Market research Purchasing General ledger Benefits Grade records
Promotion Shipping/receiving Billing Cornpensation Course records
Pricing Engineering Cost accounting Labor relations Alumni
New products Operations Training
Major Sales order Materials resource General ledger Payroll Registration system
application information system planning systems
systems Market research Purchase order Accounts Employee records Student transcript
system control systems receivable/payable system
Pricing system Engineering Budgeting Benefit systems Curriculum class
systems control systems
Quality control Funds managementCareer path Alumni benefactor
systems systems systems system

16
 Batch vs. On-Line Transaction
Processing
 Two types of TPS:
 Batch processing
 A system whereby business transactions are accumulated over a
period of time and prepared for processing as a single unit or
batch
 On-line transaction processing (OLTP)
 A system whereby each transaction is processed immediately,
without the delay of accumulating transactions into a batch
Batch Schematic

Data entry
Input
of accumulated Output
transactions
(batched)
On-line Schematic

Terminal
Terminal Terminal

Output

Terminal
Immediate
processing
of each
transaction

Terminal
Terminal
Objectives of TPS
 Process data generated by and about transactions
 Maintain a high degree of accuracy
 Ensure data and information integrity and accuracy
 Produce timely documents and reports
 Increase labour efficiency
 Help provide increased and enhanced service
 Help build and maintain customer loyalty
 Achieve competitive advantage
Data Processing Activities
Common to TPSs
 A transaction processing cycle
 Data collection
 Data editing
 Data correction
 Data manipulation
 Data storage
 Document production

Schematic
 Original data

Data
collection

Data
edit

Data
Data manipulation
correction

Data
storage

Document
production
Source Data Automation
 Source data automation
 The process of capturing data at its source with minimal manual effort
 Data are entered directly into the computer
TPS Characteristics
 They collect, store, modify and retrieve the transaction of
an organisation.
 Directly support business operations
 Must be designed in conjunction w/ the organisation’s
procedures.
 Main information processes: collecting and storage.
4 important characteristics
 Rapid response (fast performance, rapid response time)
 Reliability (low failure rate, quick and accurate recovery,
backup and recovery procedures)
 Inflexibility (every transaction processed in same way
regardless of conditions)
 Controlled processing (supports an organisation’s
operations)
Examples of batch transaction
processing
 Clearance of cheques
 Other forms of paper output
Large batch
 Mainframe PC and magnetic tape
 Payroll or stock info
 Employee: hours worked, overtime earned
 Payroll master file updated
 Pay slips created (ALL employees)
 Often run at night – less demand for info sys
3 disadvantages in batch processing
 Processing schedule predetermined
 Errors unable to be corrected during processing
 Sorting transaction data – expensive and time consuming
2 concerns w/ real-time transaction
processing
 Concurrency: data cannot be changed by 2 users at same
time
 Atomicity: steps completed succesfully as a group. If any
step fails, no other step should be completed.
Transaction processing monitor
 Software (middleware) allowing running of TP programs.
 Manages sequence of events
 Provides interface between input devices and DBMS
 Provides data security, ensuring transactions don’t get
lost/corrupted.
Differences btween real-time and batch
 Real time: each transaction is unique; transactions are stand-alone; requires
master file to be available more often for updating; fewer errors –
transaction data is validated and entered immediately; infrequent errors
may occur – but often tolerated; not practical to shut down whole system
(infrequent errors); more computer operators are required in real-time
processing – operations not centralised.
 Batch: each transaction part of a group; database not accesible all of the
time; more errors; data is organised and stored before master file is
updated – errors can occur during these steps; easier to maintain than real-
time.
Data validation
 Used to check the entry of transaction data.
 Procedures ensure transactions are correct and have
been accurately stored in the database.
 Involves transaction initiation and field checking.
Components of a transaction processing
system
 Users: take data and use it in another info system type
 Participants: conduct info processing
 People (from the environment): directly enter
transactions and perform validation
Examples of real-time transaction
processing
 Reservation systems: set aside service/product for future
use
 Motels
 Point-of-sale (POS) terminals: sells goods/services
 Library loan systems: keeps track of items borrowed from
library
System flowchart for a POS system

Customer
receipt

Inventory MIS
UPC/quantity database

Server POS system

UPC/quantity
Purchase
UPC Price database Inventory
report

Product Database
Examples of batch transaction
processing
 Cheque clearance: written order asking bank to pay
money to a person
 Bill generation: an invoice for goods/services supplied to a
customer.
 Credit card sales transaction: takes impression of
customer’s card
Databases and files
 Database: collection of data
 Types: hierarchical, network, relational
 Important features for design: good data placement, short
transactions, real-time backup, high normalisation,
archiving of historical data and good hardware
configuration
File: block of data
 Master file: info about business organisation
 Transaction file: collection of transaction records
 Report file: data formatted for presentation
 Work file: temporary file in the system used during
processing
 Program file: instructions for processing of data
Data warehousing
 Data warehouse: collects info from different data sources
 Consolidated, subject-oriented, historical and read-only
Backup procedures
 Backup: another copy of data
 Recovery processes include backup, journal, checkpoint
and recovery manager
2 types of recovery
 Backward recovery: back out or undo unwanted changes
 Forward recovery: redo changes
Recovery processes continued
 Magnetic tape: stores large data quantities inexpensively.
Uses sequential access
 Grandfather-father-son: backup procedure refers to at
least 3 generations of backup master files
 Partial backups: parts of master file backed up
Updating in a batch
 Originally feasible: details were stored on punch cards or
magnetic tape
 2 stages – collecting and processing of transaction data
into file & updating master file
 Sequential access: data accessed in a sequence. Time
consuming.
 Information technology: magnetic tape
Updating in real time
 Direct/random access: data is accessed without accessing
previous data items. Stores data based on an algorithm,
which calculates data location. When index used, called
indexed access.
 Information technology: magnetic disk
 Software – online and user-friendly
 Rapid response time – few seconds or less
Other information processes
 Collecting: generating transaction data
 Analysing data: meet user’s information needs. Output
from TPS is input to other systems
Hardware
 MICR (Magnetic ink character recognition): used by banks
to read account numbers on cheques
 ATM (Automatic teller machine): banking terminal
performing deposits and withdrawals
 Barcode readers: used in retail to collect product
information
Forms
 Document used to collect data from a person
 Examples include sign-on sheet for payroll.
 On-screen forms: populates fields in a database
 Web forms: used to purchase items over the internet
Issues related to transaction processing
systems
 Nature of work
 Non-computer procedures
 Bias
 Importance of data
 Control in transaction processing
Nature of work
 Automation of jobs: the use of information technology to
perform tasks once performed by people
 People as participants: resulted in fewer jobs in banks.
People are purchasing products by completing a web
form.
Non-computer procedures
 Organisations rely on TPS
 Manual backup procedure if system crashes
 When system up & running, user needs procedure to
enter manual transactions
Bias
 Data unfairly skewed or gives too much weight on
particular result
 Data gathered can be presented in biased way using
tables and charts
 Becomes ethical issue when relevant information is
misrepresented
Importance of data
 Data security: involves series of safeguards to protect
data
 Encryption: coding data
 Decryption: changing it back
 Firewalls: used on networks to verify and authenticate all
incoming data
Importance of data continued
 Accuracy: extent data is free from errors. Errors caused
by mistakes in gathering data, data entry, mismatch of data
and person, or out-of-date information
 Data validation: checks data entry. Checks for missing
data, too high or too low data values, data values
inconsistent with other data, data in wrong format.
 Carried out using range checks, list checks, type checks
and check digits
Data integrity
 Describes reliability of data.
 Involves accuracy, currency and relevance of data
ACID test
 Atomicity: all steps involved in transaction completed
successfully as a group
 Consistency: transaction successfully transforms the
system and database from one valid state to another
 Isolation: transaction is processed concurrently with
other transactions. As if only transaction executing the
system
 Durability: all changes transaction makes to database
become permanent
Control in transaction processing
 Starts with collecting, includes manner TPS manipulates
data & way errors are corrected
 Some people in management positions are willing to
falsify transactions to promote careers
Aspects of TPS relevant to “A large retail
company”
 Real-time transaction processing
 Manual transaction systems
 Components of a TPS
 Credit card sales transactions
 Database and files
 Updating in a batch, real-time
 Other information processes: collecting
 Nature of work
 Non-computer procedures
 Bias
Real-time transaction processing
 It is important in an organisation such as a “large retail company” for
the immediate processing of data & instant confirmation of a
transaction (specifically needed in a retail environment where servicing
a number of customers with a limited staff under a limited amount of
time is usual). The 4 important characteristics of a TPS stresses this.
They are rapid response, reliability, inflexibility and controlled
processing. Also, the concerns of concurrency and atomicity are
important in ensuring data is not mishandled or any procedures/steps
taken are completed successfully as a group or not executed at all.
Manual transaction systems
 Manual transaction systems are imperative in the retail environment
because they were the conceptual basis for real-time TPS. They were used
long before the rise in technology allowed for easier data collection and
storage. Obviously, they have been around since trading and business took
its early strides. In smaller stalls who still cannot afford the technology
corporations use, it is necessary to use manual transaction systems to
record business activities. Manual transaction systems are based on a clear
set of rules followed by a person. They make it easier to transmit the data
into a format suitable for recording onto an information technology e.g. a
computer. Of course, computerisation of a manual T.S. brings benefits, when
used by a large retail organisation. It increases the rate at which products
are sold, which means more profit for the retail chain. The less time taken
for a customer to purchase a product is invaluable in customer satisfaction,
as there are lesser queues – therefore lesser time spent on waiting. Also
manual T.S.s provides the retail chain with information in what products are
on demand. The retail chain capitalises on this information on consumer
habits and they can tailor their products to attract more customers,
thereby meaning more profit.
Components of a TPS
 People are obviously important in an operation of a TPS. They are usually
classified as users, participants and people in the environment. This classification
allows for easier role recognition within the retail chain organisation. Users do
not interact w/ the TPS but use the data provided. They provide information
about the system that is useful to the large retail chain. The participants are the
shop workers which do the actual work conducted in a retail chain store. They
enter the data into the TPSs. And the peole from the environment are the
consumers, or people who buy goods from the shop front. They become
participants when they use EFTPOS terminals located within the retail store to
purchase goods and ATMS within or outside of it. They become participants in
the sense that they directly enter transactions and perform validations.
Examples of real-time transaction
processing
 Reservation systems basically involve setting aside a
product or service for future purchase or use. They are
common in the retail industry. Lay-by is a good example.
This involves the delaying of a valued item for future
purchase. A minor monetary deposit, usually a small
percentage of the overall purchase price of the product is
then used to secure the customer the right to purchase
this product at a later time.
Examples of real-time transaction
processing continued
 POS terminals are used by retail stores to sell goods and
services. In large retail organisations, POS terminals send
inventory data to a central computer (sale made). We as
users become participants when we use these machines
to purchase items from the store. The data is converted
for easier transmission. Relevant information and the
price are displayed using barcode readers.
Examples of real-time transaction
processing continued
 Credit card sales transactions can be done over the
internet, at POS terminals or taking an impression of
customer’s credit card. Both the POS system and the
multi-page credit slip system rely on batch processing. We
use them as an alternative to money, to pay for retail
store purchases.
Databases and files
 In any large retail chain/organisation, the information
processes often vary. In the handling of data, the storage
and retrieval of data must be spot on. Retail chains rely
on this trait for the success of their business.
Databases and files
 Good data placement:
Database is designed to efficiently gain access to
frequently used data & data patterns
 Short transactions: transactions can be processed fast
 Real-time backup: saving data during low usage or idle
time
Databases and files continued
 High normalisation: data redundancy is minimised to
increase update speed. Also improves backup speed.
 Archiving of historical data: old data stored in
chronological order in separate databases.
 Good hardware configuration: the setup must be able to
handle a number of users and provide rapid response
Files
 Master file: info about a retail chain’s business. This is
where the data is stored
 Transaction file: audit trails and history for the retail chain
 Report file: formatted user presentable data
 Work file: temporary file
 Program file: data processing instructions.
Backup procedures
 Backups provide safety nets for data restoration in case
of a system crash/malfunction. Without these, the retail
chain will cease to make profits as a result of data loss.
They are usually stored in a safe location.
Recovery process
 When a TPS fails, data must be recovered immediately for
restoration.
 Journal: keeps track of company records on a physical
medium.
 Checkpoint: are like signposts. Indicate where, when, what
data was saved in a daily period. Syncs files and journals
together for smoother transaction reviewing
Recovery process
 Backward recovery: undo database changes
 Forward recovery: redo database changes
 Recovery manager: restores database to a previous
condition
Magnetic tape
 Often used. Inexpensive. Appropriate for storing large
amounts of data. An alternative to hard disk drives.
 Data is read from the beginning until the end.
 Suitable for most transaction backups
Grandfather-father-son
 3 generations backup procedure. Son is the most recent,
whilst father and grandfather are the oldest. Commonly
used in conjunction w/ magnetic tape. Ensures data
cannot be lost. A large retail chain should have more than
3 generations.
Other information processes
 Collecting: entering the transaction data. The users who
become participants by using EFTPOS or ATM are the
data source
 MICR readers are used by banks to read account
numbers on cheques
 ATM: allows deposits and withdrawals for customers
Other information processes continued
 Barcode readers collect product information. They scan the barcode on
the product , the details kept in a central computer. Data about the
item is quickly collected.
 Forms: documents to collect data from customers. We use this to
create memberships, gain customer details and update information.
There are paper forms, such as sign on sheets; on-screen forms for
computerised population of fields in a database; web forms used by
consumers to buy items over the internet.
Simplified Overview of a
Transaction Processing System

Schematic
Data entry & input

Documents
Processing
& reports

Documents:
Internally generated
transactions: • pick list
Database • cheques to vendors
• shipped orders
• purchase orders • receiving notices
Database update: • paycheques
• employee time cards
• customer orders Operational reports:
Externally generated
transactions: • inventory • finished product
• customer orders • purchase orders inventory status
• vendor invoices • customers • raw materials; packing
materials; spare parts;
• customer payments • suppliers inventory status
Control and Management Issues
 Business resumption planning
 The process of anticipating and providing for disasters.
 Disaster recovery
 The implementation of the business resumption plan.
 Transaction processing system audit
 An examination of the TPS in an attempt to answer three basic
questions
 Does the system meet the business need?
 What procedures and controls have been established?
 Are the procedures and controls being properly used?
 Traditional TPS –
Order Processing
 Order processing
 Processing an order from entry to delivery, including traditional
accounting transactions

Schematic
Invoice
Customer
Products Customer order in person or via
mail, phone, EDI, internet

Inventory status Order entry/

sales configuration

Orders
Planned
Finished Shipment shipments
product Routing
planning
inventory
Pick list Planned
shipments
Shipment & routes
execution

Shipped orders Scheduling

Invoicing
Data Flow Diagram of an Order Entry
System

Schematic
D6 Inventory D1 Products/prices D2 Customer payment history
Product numbers, Products, price
inventory levels information Credit status
2. Verify
Open
1. Collect product
Orders Orders 3. Authorize orders
order numbers
credit
D3 New orders
info & stock
on hand
Rejected,
partly filled
orders

Back
Back orders 4. Notify orders
customer
D4 Back orders

Customer notification
Customer Rejected
orders

D5 Rejected orders
Order Processing Support Systems -
Sales Configuration
 Sales configuration
 Ensures that products and services ordered are sufficient to
accomplish customer’s objectives and will work well together
Order Processing Support Systems -
Shipment Planning
 Shipment planning
 A system that determines which open orders will be filled and from
which location they will be shipped
Order Processing Support Systems -
Shipment Execution
 Shipment execution
 A system that coordinates the outflow of all products and goods from
the organization, with the objective of delivering quality products on
time to customers
Order Processing Support Systems -
Inventory Control
 Inventory control
 A system that updates the computerized inventory records to reflect
the exact quantity on hand of each stock keeping unit
 Status reports
 Summarize all inventory items in stock, or shipped over a specified period
of time
Order Processing Support Systems -
Invoicing
 Invoicing
 Generates customer invoices based on records received from the
shipment execution TPS
Order Processing Support Systems -
Customer Interaction System
 Customer interaction
 A system that monitors and tracks each customer interaction with
the company
 Customer

Request Problem, idea,

Other
for Sale request for
contacts
proposal information

Customer
interaction
system

Market Product
research development

Sales Quality
control
Marketing
Order Processing Support Systems -
Routing and Scheduling
 Routing
 A system that determines the best way to get goods and products
from one location to another
 Scheduling
 A system that determines the best time to deliver goods and services
Purchasing System

Schematic
 Raw materials
Packing materials
Spare parts
Inventory control
Inventory control
Purchase status report
order
request Purchase order
Employees
processing
Purchase
order
Purchase
order

Material
Receiving Supplier

Receiving Invoice
notice

Accounts Cheque
payable
Purchasing System
 Inventory control
 Maintains stock of items such as raw materials, packing materials,
spare parts, and supplies
 Purchase order (P.O.) processing
 A system that helps purchasing department complete transactions
quickly and efficiently
 Receiving
 A system that creates a record of expected and actual receipts
 Reconciles purchase orders with what is actually received
 Accounts payable
 A system that increases an organization’s control over purchasing,
improves cash flow
 increases profitability, and provides more effective management of
current liabilities
P.O. Example
 (Click to view)
Accounting System
 Accounting systems
 Consist of…
 Budget
 Accounts receivable
 Accounts payable
 Payroll
 Asset management
 General ledger
Accounts Payable Example
 (Click to view)
Financial Systems

Schematic
 Asset
Customer
management

Cost of assets
Payments
Accounts Accounts
receivable payable

Amounts owed by customers Amounts owed by company

Amounts paid by customers Amounts paid by company

Labour costs General

Payroll
ledger Asset depreciation

Paycheques Expense
Time transactions
cards

Customer Budget
Financial Systems -
Accounts Receivable
 Accounts receivable
 A system that manages the cash flow of the company by keeping track
of the money owed the company on charges for goods sold and
services performed
‘Statement of Account’ Example
 (Click to view)
Financial Systems –
Accounts Receivable
 Accounts receivable aging report
 Tells managers what bills are overdue, either customer by customer
or in a summary format
‘Aging Report’ Example
 (Click to view)
Financial Systems - Payroll
 Payroll…
 Generates payroll checks and stubs, as well as W-2 statements at the
end of the year for tax purposes
Financial Systems - Payroll
 Payroll journal
 Helps managers monitor total payroll costs for an organization and
the impact of those costs on cash flow
Financial Systems -
Asset Management
 Asset management transaction processing system
 A system that controls investments in capital equipment and manages
depreciation for maximum tax benefits
Financial Systems - General Ledger