Chapter 7 Operational Systems PDF

Chapter 07: Operational Systems Stair, Reynolds and Chesney: Principles of Business Information Systems, Fourth edition (9781473774605) © Cengage Learning 2021  Principles An organization must have information systems that support the...

Chapter 07: Operational Systems Stair, Reynolds and Chesney: Principles of Business Information Systems, Fourth edition (9781473774605) © Cengage Learning 2021  Principles An organization must have information systems that 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. Traditional transaction processing systems support the various business functions of organizations that have not yet implemented enterprise resource planning systems. Electronic and mobile commerce allow transactions to be made by the customer, with less need for sales staff, and open up new opportunities for conducting business. A company that implements an enterprise resource planning system is creating a highly integrated set of systems, which can lead to many business benefits. For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Enterprise resource planning Organizations are moving from a collection of non-integrated transaction processing systems to highly integrated enterprise resource planning (ERP) to perform routine business operations. An alternative approach to having separate systems is to have one enterprise-wide system. Enterprise resource planning (ERP) is a set of integrated programs that manage a company’s vital business operations for an entire multisite, global organization. For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  ERP Overview ERP systems evolved from materials requirement planning (MRP) systems that allowed companies to plan out how much raw material they would need at a certain time in the future, plan their production, control their inventory and manage their purchasing process. Organization realized that their systems lack the integration needed to coordinate these activities and share information. This led firms to create new systems which came to be known as ERP. ERP emerged from the recognition that legacy transaction processing systems lacked necessary integration for information sharing. For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Advantages of ERP Improved access to data for operational decision making. ERP operate via an integrated database using one set of data to support all business functions. Elimination of costly, inflexible legacy systems. Replace separate systems with a single, integrated set of applications for the enterprise. Improvement of work processes based on best practices. ERP systems workflows are designed based on industry best practices. Upgrade of technology infrastructure. Implementing ERP is an opportunity to upgrade the firm’s IT infrastructure. For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Disadvantages of ERP Expense and time in implementation Difficulty implementing change Difficulty integrating with other systems Risks in using one vendor Risk of implementation failure For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Transaction processing systems Transaction processing systems (TPSs) – Process detailed data necessary to update records about fundamental business operations – Include order entry, inventory control, payroll, accounts payable, accounts receivable, general ledger, etc. – Provide data for other business processes Management information system/decision support system (MIS/DSS) Special-purpose information systems For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning Traditional transaction processing methods and objectives 1 Batch processing system – 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 For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Traditional transaction processing methods and objectives 2 Organizations expect their TPS to: – Process data generated by and about transactions – Maintain a high degree of accuracy and integrity – Avoid processing fraudulent transactions – Produce timely user responses and reports – Increase labour efficiency – Help improve customer service – Help build and maintain customer loyalty – Achieve competitive advantage For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Transaction processing activities TPS – Capture and process data that describes fundamental business transactions – Update databases – Produce a variety of reports For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Transaction processing cycle Data collection Data editing Data correction Data manipulation Data storage Document production For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Data collection Capturing and gathering all data necessary to complete the processing of transactions Data collection can be: – Manual – Automated via special input devices (such as scanners, point-of- sale devices, and terminals) Data should be: – Collected at source – Recorded accurately, in a timely fashion For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Data Editing Checking data for validity and completeness to detect any problems Examples – Quantity and cost data must be numeric – Names must be alphabetic – Verification that codes associated with an individual transaction are present in a database containing valid codes For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Data correction Re-entering data that was not typed or scanned properly If invalid data is detected, system should provide error messages – Error messages must specify the problem so proper corrections can be made Software tools can be used to identify bad data For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Data manipulation Performing calculations and other data transformations related to business transactions Can include the following: – Classifying data – Sorting data into categories – Performing calculations – Summarizing results – Storing data in the organization’s database for further processing For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Data storage Updating one or more databases with new transactions After being updated, this data can be further processed and manipulated by other systems For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Document production and reports Generating output records, documents, and reports – Hard-copy paper reports – Displays on computer screens Results from one TPS can be inputs to another system Typical uses – Checks and invoices, management information, decision support, and compliance with local, state, and federal regulations For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  TPS applications Order Processing Systems include order entry, sales configuration, shipment planning, shipment execution, inventory control, and accounts receivable Purchasing Systems include inventory control, purchase order processing, receiving, and accounts payable Accounting Systems include the budget, accounts receivable, payroll, asset management, and general ledger For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Electronic commerce Electronic commerce is conducting a business transaction (e.g., distribution, buying, selling, and servicing) electronically over computer networks, primarily the Internet but also extranets, and corporate networks B2C – business to consumer, allows customers to place orders, with their order processing system B2B – business to business, where the customer is another business C2C – allowing consumers to sell to other consumers. eBay is an example For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Mobile commerce Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, mobile phones, and smartphones, to transact For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Production and Supply Chain Management 1 ERP production plan process: draws on the information available in the ERP system database – Sales forecasting: estimates future customer demand – Sales and operations plan: takes demand and current inventory levels to determine production for future demands – Demand management: develops master production schedule For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Production and Supply Chain Management 2 ERP production plan process (continued) – Detailed scheduling: schedules production run for each product and from one product to the next – Materials requirement planning: determines amount and timing of raw material orders with suppliers – Purchasing: purchases raw materials and transmits to qualified suppliers – Production: plans details of running and staffing production operation For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning Customer Relationship Management Customer relationship management (CRM) system: helps a company manage all aspects of customer encounters, including: – Marketing and advertising – Sales – Customer service after the sale – Programs to retain loyal customers For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Sales ordering Sales ordering: set of activities that must be performed to capture a customer sales order, including the following: – Recording items to be purchased – Setting sales price – Recording order quantity – Determining total cost of the order including delivery costs – Confirming customer’s available credit For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  International issues associated with operational systems Challenges that must be met by an operational system of a multinational company include: – Different languages and cultures – Disparities in IS infrastructure – Varying laws and customs rules – Multiple currencies ERP software vendors help meet these challenges For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Summary Enterprise system: ensures information can be shared across all business functions and all levels of management to support the running and managing of a business Transaction processing systems (TPSs): process detailed data necessary to update records about fundamental business operations Batch processing system: accumulate transactions over a period of time and then process them Online transaction processing (OLTP): process each transaction immediately For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Summary (cont.) Transaction processing cycle: data collection, data editing, data correction, data manipulation, data storage, and document production Many types of transaction processing systems support order processing, purchasing, and accounting business functions For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning  Summary (cont.) Enterprise resource planning (ERP): set of integrated programs that manage a company’s vital business operations for an entire multisite, global organization Customer relationship management (CRM) system: helps a company manage all aspects of customer encounters Enterprise system of a multinational company must meet many challenges For use with Principles of Business Information Systems, 4e by Stair, Reynolds & Chesney © 2021 Cengage Learning