Overview

• An organization must have information systems that support

routine, day-to-day activities and that help a company add value
to its products and services.
• An organization that implements an enterprise system is creating
a highly integrated set of systems, which can lead to many
business benefits.
• An organization must have access to data across all of its
corporate functions and enterprise systems to help drive decision
making
Objectives
• Identify the basic activities and business objectives common to all
transaction processing systems.
• Describe the transaction processing systems associated with the
order processing, purchasing, and accounting business functions.
• Identify the basic functions performed and the benefits derived from
the implementation of an enterprise resource planning system,
customer resource management, and product lifecycle management
system.
• Describe the hosted software model for enterprise systems and
explain why this approach is so appealing to SMEs.
• Identify the challenges that organizations face in planning, building,
and operating their enterprise systems.
• Identify tips for avoiding many of the common causes for failed
enterprise system implementations.
• Identify tools that can be used to analyze this data, and demonstrate
an ability to find valuable relationships between data.
Contents
• Transaction Processing Systems
• Enterprise Systems
Introduction
• This chapter begins with an overview of the individual transaction
processing systems that support the fundamental operations of
many organizations.
• Their data collection and processing methods, objectives, and
primary activities are covered.
• Then enterprise systems, collections of integrated information
systems that share a common database, are discussed.
• Enterprise systems ensure that data can be shared across all
business functions and all levels of management to support the
operational and management decision making needed to run the
organization.
• The basic functions and benefits of these systems as well as the
challenges of successfully implementing them are discussed.
Transaction Processing Systems
(Cont.)
• Many organizations employ transaction processing systems
(TPSs), which capture and process the detailed data necessary to
update records about the fundamental business operations of the
organization.
• These systems include order entry, inventory control, payroll,
accounts payable, accounts receivable, and the general ledger, to
name just a few.
• A TPS also provides valuable input to management information
systems, decision support systems, and knowledge management
systems.
• Indeed, transaction processing systems serve as the foundation
for these other systems. See Figure 10.1.
Transaction Processing Systems
(Cont.)
• A TPS also provides valuable input to management information
systems, decision support systems, and knowledge management
systems.
• Indeed, transaction processing systems serve as the foundation
for these other systems. See Figure 10.1.
Transaction Processing Systems
(Cont.)
• Transaction processing systems support routine operations
associated with business processes, such as customer ordering
and billing, shipping, employee payroll, purchasing, and
accounting.
• TPSs use a large amount of input and output data to update the
official records of the company about orders, sales, customers,
and so on. TPSs, however, don’t provide much support for decision
making.
Traditional Transaction Processing Methods
and Objectives
• With batch processing systems, business transactions are
accumulated over a period of time and prepared for processing as a
single unit or batch. See Figure 10.2a.
• Transactions are accumulated for as long as necessary to meet the
needs of the users of that system.
• For example, it might be important to process invoices and customer
payments for the accounts receivable system daily.
• On the other hand, the payroll system might process time cards
biweekly to create checks, update employee earnings records, and
distribute labor costs.
• The essential characteristic of a batch processing system is the delay
between an event and the eventual processing of the related
transaction to update the organization’s records.
• For many applications, batch processing is an appropriate and cost-
effective approach. Payroll transactions and billing are typically done
via batch processing.
Traditional Transaction Processing Methods
and Objectives (Cont.)
Traditional Transaction Processing Methods
and Objectives (Cont.)
• With online transaction processing (OLTP) each transaction is
processed immediately without the delay of accumulating
transactions into a batch, as shown in Figure 10.2b.
• Consequently, at any time, the data in an online system reflects the
current status.
• This type of processing is essential for businesses that require
access to current data such as airlines, ticket agencies, and stock
investment firms.
• Many companies find that OLTP helps them provide faster, more
efficient service—one way to add value to their activities in the
eyes of the customer.
 Traditional Transaction Processing Methods
and Objectives (Cont.)
• Figure 10.4 shows the
traditional flow of key
pieces of information
from one TPS to
another for a typical
manufacturing
organization.
• When transactions
entered into one
system are processed,
they create new
transactions that flow
into another system.
Traditional Transaction Processing Methods
and Objectives (Cont.)
• Because of the importance of transaction processing,
organizations expect their TPSs to accomplish a number of
specific objectives, including the following:
• Capture, process, and update databases of business data
required to support routine business activities
• Ensure that the data is processed accurately and completely
• Avoid processing fraudulent transactions
• Produce timely user responses and reports
• Reduce clerical and other labor requirements
• Help improve customer service
• Achieve competitive advantage
Traditional Transaction Processing Methods
and Objectives (Cont.)
• A TPS typically includes the following types of systems:
• Order processing systems. Running these systems efficiently
and reliably is so critical that the order processing system is
sometimes referred to as the lifeblood of the organization. The
processing flow begins with the receipt of a customer order.
• Accounting systems. The accounting systems must track the
flow of data related to all the cash flows that affect the
organization. As mentioned earlier, the order processing
system generates an invoice for customer orders to include
with the shipment.
• Purchasing systems. The traditional transaction processing
systems that support the purchasing business function include
inventory control, purchase order processing, receiving, and
accounts payable.
Traditional Transaction Processing Methods
and Objectives (Cont.)

• Depending on the specific nature and goals of the organization, any

one of the objectives in Table 10.1 might be more important than
others.
Transaction Processing Systems for Entrepreneurs
and Small- and Medium-Sized Enterprises
• Many software packages provide integrated transaction
processing system solutions for small- and medium-sized
enterprises (SMEs), wherein SME is a legally independent
enterprise with no more than 500 employees.
• Integrated transaction processing systems for SMEs are typically
easy to install and operate and usually have a low total cost of
ownership, with an initial cost of a few hundred to a few thousand
dollars.
• Such solutions are highly attractive to firms that have outgrown
their current software but cannot afford a complex, high-end
integrated system solution.
• Table 10.2 presents some of the dozens of such software
solutions available.
Transaction Processing Systems for Entrepreneurs
and Small- and Medium-Sized Enterprises
• Table 10.2 presents some of the dozens of such software solutions
available.
Transaction Processing Activities
• Along with having common characteristics, all TPSs perform a
common set of basic data-processing activities.
• TPSs capture and process data that describes fundamental
business transactions.
• This data is used to update databases and to produce a variety of
reports for people both within and outside the enterprise.
• The business data goes through a transaction processing cycle
that includes data collection, data editing, data correction, data
processing, data storage, and document production. See Figure
10.5.
Transaction Processing Activities
Data Collection
• Capturing and gathering all data necessary to complete the
processing of transactions is called data collection.
• In some cases, it can be done manually, such as by collecting
handwritten sales orders or inventory update forms.
• Data collection begins with a transaction (e.g., taking a customer
order) and results in data that serves as input to the TPS.
• Data should be captured at its source and recorded accurately in a
timely fashion, with minimal manual effort and in an electronic or
digital form that can be directly entered into the computer.
• This approach is called source data automation.
Data Collection (Cont.)
Data Editing
• An important step in processing transaction data is to check data
for validity and completeness to detect any problems, a task called
data editing.
• For example, quantity and cost data must be numeric, and names
must be alphabetic; otherwise, the data is not valid.
• Often, the codes associated with an individual transaction are
edited against a database containing valid codes.
• If any code entered (or scanned) is not present in the database,
the transaction is rejected.
Data Correction
• It is not enough simply to reject invalid data.
• The system should also provide error messages that alert those
responsible for editing the data.
• Error messages must specify the problem so proper corrections
can be made.
• A data correction involves reentering data that was not typed or
scanned properly.
• For example, a scanned UPC code must match a code in a master
table of valid UPCs.
• If the code is misread or does not exist in the table, the checkout
clerk is given an instruction to rescan the item or type the
information manually.
Data Processing
• Another major activity of a TPS is data processing, performing
calculations and other data transformations related to business
transactions.
• Data processing can include classifying data, sorting data into
categories, performing calculations, summarizing results, and
storing data in the organization’s database for further processing.
Data Storage
• Data storage involves updating one or more databases with new
transactions.
• After the database is updated, the data can be further processed
by other systems so that it is available for management reporting
and decision making.
• Thus, although transaction databases can be considered a by-
product of transaction processing, they can significantly affect
nearly all other information systems and decision-making
processes within an organization.
• The speed at which information is available depends on the
processing system being used.
Document Production
• Document production involves generating output records,
documents, and reports.
• These can be hard-copy paper reports or displays on computer
screens (sometimes referred to as soft copy).
• Printed paychecks, for example, are hardcopy documents
produced by a payroll TPS, whereas an outstanding balance report
for invoices might be an electronic report displayed by an
accounts receivable TPS.
• Often, as shown earlier in Figure 10.6, results from one TPS flow
downstream to become input to other systems, which might use
the results of an inventory database update to create a stock
exception report, a type of management report showing items
with inventory levels below the specified reorder point.
Enterprise Systems
• An enterprise system is central to individuals and organizations of
all sizes and ensures that information can be shared with
authorized users across all business functions and at all levels of
management to support the running and managing of a business.
• Enterprise systems employ a database of key operational and
planning data that can be shared by all, eliminating the problems
of missing information and inconsistent information caused by
multiple transaction processing systems that each support only
one business function or one department in an organization.
• Examples of enterprise systems include enterprise resource
planning systems that support supply chain processes, such as
order processing, inventory management, and purchasing, and
customer relationship management systems that support sales,
marketing, and customer service-related processes.
Enterprise Resource Planning
• Enterprise resource planning (ERP) is a set of integrated
programs that manage a company’s vital business operations for
an entire organization—even a complex, multisite, global
organization.
• Recall that a business process is a set of coordinated and related
activities that takes one or more types of input and creates an
output of value to the customer of that process.
• The customer might be a traditional external business customer
who buys goods or services from the firm.
• An example of such a process is capturing a sales order, which
takes customer input and generates an order.
• The customer in a business process might also be an internal
customer, such as an employee in another department of the firm.
Enterprise Resource Planning
Advantages of ERP
• Increased global competition, new needs of executives for control
over the total cost and product flow through their enterprises, and
ever-more-numerous customer interactions drive the demand for
enterprise-wide access to real-time information.
• ERP offers integrated software from a single vendor to help meet
those needs.
• The primary benefits of implementing ERP include improved
access to quality data for operational decision making, elimination
of costly, inflexible legacy systems, improvement of work
processes, and the opportunity to upgrade and standardize
technology infrastructure.
• ERP vendors have also developed specialized systems that
provide effective solutions for specific industries and market
segments.
Leading ERP Systems
• ERP systems are commonly used in manufacturing companies,
colleges and universities, professional service organizations,
retailers, and healthcare organizations.
• The business needs for each of these types of organizations varies
greatly. In addition, the needs of a large multinational
organization are far different from the needs of a small, local
organization.
• Thus, no one ERP software solution from a single vendor is “best”
for all organizations.
• For example, MIE Trak PRO, which is designed for manufacturers,
allows companies to manage the entire production cycle, with the
ability to customize the elements.
• Plus & Minus is an integrated ERP focusing on a single-file system,
which would suit a smaller organization. See Figure 10.8.
Leading ERP Systems (Cont.)
Leading ERP Systems (Cont.)
• Large organizations were the leaders in adopting ERP systems as
only they could afford the associated large hardware and software
costs and dedicate sufficient people resources to the
implementation and support of these systems.
• Smaller organizations moved to ERP systems about 10 years after
larger organizations did.
• The smaller firms simply could not afford the investment required
in hardware, software, and people to implement and support ERP.
• However, ERP software vendors gradually created new ERP
solutions with much lower start-up costs and faster, easier
implementations.
Supply Chain Management (SCM)
• An organization can use an ERP system within a manufacturing
organization to support what is known as supply chain
management (SCM), which includes planning, executing, and
controlling all activities involved in raw material sourcing and
procurement, conversion of raw materials to finished products,
and the warehousing and delivery of finished product to
customers.
• The goal of SCM is to decrease costs and improve customer
service, while at the same time reducing the overall investment in
inventory in the supply chain.
Customer Relationship
Management
• A customer relationship management (CRM) system helps a company
manage all aspects of customer encounters, including marketing,
sales, distribution, accounting, and customer service. See Figure 10.9.
• Think of a CRM system as an address book with a historical record of
all the organization’s interactions with each customer.
• The goal of CRM is to understand and anticipate the needs of current
and potential customers to increase customer retention and loyalty
while optimizing the way that products and services are sold.
• CRM is used primarily by people in the sales, marketing, distribution,
accounting, and service organizations to capture and view data about
customers and to improve communications.
• Businesses implementing CRM systems often report benefits such as
improved customer satisfaction, increased customer retention,
reduced operating costs, and the ability to meet customer demand.
Customer Relationship
Management (Cont.)
Customer Relationship
Management (Cont.)
• The key features of a CRM system include the following:
• Contact management. The ability to track data on individual
customers and sales leads and then access that data from any
part of the organization.
• Sales management. The ability to organize data about
customers and sales leads and then to prioritize the potential
sales opportunities and identify appropriate next steps.
• Customer support. The ability to support customer service
representatives so that they can quickly, thoroughly, and
appropriately address customer requests and resolve customer
issues while collecting and storing data about those
interactions.
Customer Relationship
Management (Cont.)
• Marketing automation. The ability to capture and analyze all
customer interactions, generate appropriate responses, and gather
data to create and build effective and efficient marketing campaigns.
• Analysis. The ability to analyze customer data to identify ways to
increase revenue and decrease costs, identify the firm’s “best
customers,” and determine how to retain and find more of them.
• Social networking. The ability to create and join sites such as
Facebook and Instagram, where the company can make contacts with
potential customers.
• Access by mobile devices. The ability to access Web-based customer
relationship management software by smartphones, tablets, and
other mobile devices.
• Import contact data. The ability for users to import contact data
from various data service providers that can be downloaded for free
directly into the CRM application.
Product Lifecycle Management
(PLM)
• Product lifecycle management (PLM) is an enterprise business
strategy that creates a common repository of product information
and processes to support the collaborative creation, management,
dissemination, and use of product and packaging definition
information.
• Product lifecycle management (PLM) software provides a means
for managing the data and processes associated with the various
phases of the product lifecycle, including sales and marketing,
research and development, concept development, product design,
prototyping and testing, manufacturing process design,
production and assembly, delivery and product installation,
service and support, and product retirement and replacement.
Product Lifecycle Management
(PLM) (Cont.)
Product Lifecycle Management
(PLM) (Cont.)
• The scope of PLM software may include computer-aided design,
computeraided engineering, and computer-aided manufacturing.
• Computer-aided design (CAD) is the use of software to assist in
the creation, analysis, and modification of the design of a
component or product.
• Computer-Aided engineering (CAE) is the use of software to
analyze the robustness and performance of components and
assemblies.
• CAE software supports the simulation, validation, and
optimization of products and manufacturing tools.
• CAE is extremely useful to design teams in evaluating and decision
making.
• Computer-aided manufacturing (CAM) is the use of software to
control machine tools and related machinery in the manufacture
of components and products.
Product Lifecycle Management
(PLM)
• The model generated in CAD and verified in CAE can be input into
CAM software, which then controls the machine tool.
• See Figure 10.11.
Product Lifecycle Management
(PLM)
• Use of an effective PLM system enables global organizations to
work as a single team to design, produce, support, and retire
products, while capturing best practices and lessons learned along
the way.
• PLM powers innovation and improves productivity by connecting
people across global product development and manufacturing
organizations with the product and process knowledge they need
to succeed. See Figure 10.12.
Product Lifecycle Management
(PLM)
Product Lifecycle Management
(PLM)
• PLM software is created for two broad categories of
manufacturing: discrete manufacturing and process
manufacturing.
• Discrete manufacturing is the production of distinct items such
as autos, airplanes, furniture, or toys that can be decomposed
back into their basic components.
• Process manufacturing is the production of products—such as
soda, laundry detergent, gasoline, and pharmaceutical drugs—
that are the result of a chemical process; these products cannot be
easily decomposed back into their basic components.
Product Lifecycle Management
(PLM)
Software Product Planning and
Development
• Much of the PLM software discussed in this chapter is used
extensively in the manufacturing industry; however, software
companies also make use of PLM software to streamline their
product planning and development efforts.
• For instance, enterprise solutions such as JIRA, Asana, and Aha!
are three such tools used by engineering and product teams to
document and manage the tasks necessary for building and
delivering their products to market.
• They are used to support both agile and waterfall software
development methodologies.
• Agile is a very iterative process of defining and managing the
completion of product requirements.
• The waterfall approach is a process that requires all the detail and
requirements up front prior to beginning the build.
Overcoming Challenges in Implementing
Enterprise Systems
Hosted Software Model for Enterprise
Software
• Many business application software vendors have migrated much
of their offerings to a hosted software model.
• The goal is to help customers acquire, use, and benefit from new
technology while a voiding much of the associated complexity and
high start-up costs.
Lesson Overview
• What advantages do integrated enterprise systems offer an
organization?
• What factors should organizations consider when adopting
enterprise systems to support their business processes and plan
for the future?
• What tools can organizations use to analyze data and identify
trends?
Summary
• Transaction processing systems (TPSs) are at the heart of
most information systems in businesses today.
• A TPS is an organized collection of people, procedures, software,
databases, and devices used to capture fundamental data about
events that affect the organization (transactions) and that use that
data to update the official records of the organization.
• Enterprise resource planning (ERP) software supports
the efficient operation of business processes by integrating
activities throughout a business, including sales, marketing,
manufacturing, logistics, accounting, and staffing.
• There have been many types of enterprises systems discussed
in this chapter including, but not limited to, customer
relationship management tools like Salesforce to transaction
processing systems, PLMs, social analytics tools, and more.