TRANSACTION PROCESSING SYSTEM

(TPS)

Week 8
Financial Information System Model
 Characteristics of Functional Information Systems
1. A functional information system consists of several smaller
information systems that support specific activities performed in
the functional area.
2. The specific IS applications in any functional area can be
integrated to form a coherent departmental functional system, or
they can be completely independent.

3. Functional information systems interface with each other to form

the organization-wide information system.

4. Some organizational information systems interface with the

environment.

5. Information systems applications support the three levels of an

organization’s activities: operational, managerial, and strategic.
The Four Major Types of Information Systems
 Transaction Processing

• Transaction
– An exchange involving goods or services
 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

• Information system used to support and

record transactions
 Transaction Processing Systems (TPS)
• Basic business systems that serve the
operational level

• A computerized system that performs and

records the daily routine transactions necessary
to the conduct of the business
 Transaction Processing Systems

 Transaction Processing Systems (TPS) =

“the information system that support business processes, mainly
accounting & finance transactions, with some sales, personnel, &
production activities as well.”

 TPS is the backbone of an organization’s information systems.

 It monitors, collects, stores, processes & disseminates information
for all routine core business transactions.
 These data are input data to functional information systems
applications, DSS, and CRM.
TPS, MIS/DSS, and Special Information Systems
 Transaction Processing System
• TYPE : Operational-level
• INPUTS : transactions, events
• PROCESSING: updating
• OUTPUTS : detailed reports
• USERS : operations personnel, supervisors
• DECISION-MAKING: highly structured
The Transaction Processing Cycle
1. Data collection
2. Data editing
3. Data correction
4. Data manipulation
5. Data storage
The Transaction Processing Cycle
• Data collection
– The process of capturing transaction related data
• Data editing
– Checking the validity of data entered
• Data correction
– Implemented if an error is found in the entered data
• Data manipulation
– Processing transaction data
• Data storage
– Altering databases to reflect the transaction
The Transaction
Processing Cycle
 Different Transaction
Processing for Different Needs
• Order processing system
– Supports the sales of goods or services to
customers
– Arranges for shipment of products
• Purchasing system
– Supports the purchase of goods and raw
materials from suppliers
TPS
Interaction
 Objectives of TPS

• Primary goal of TPS

• Specific objectives of a TPS
 Objectives of TPS

Primary goal of TPS

To provide all the information needed by law and/or by
organizational policies to keep the business running
properly and efficiently.
 Objectives of TPS

Specific objectives of a TPS

 to allow for efficient & effective operation of the organization.
 to provide timely documents and reports.
 to increase the competitive advantage of the corporation.
 to provide the necessary data for tactical & strategic systems,
such as Web-based applications.
 to ensure accuracy & integrity of data & information.
 to safeguard assets & security of information.
 The purpose of
TPS
1. To Keep records about the state of the
organization
2. To process transactions that affect the
records
3. To produce output that reports on
transactions that have occurred
Transaction Processing System Structure
 Transaction Processing System Structure

1. Inputs to a transaction processing system come

from users and other transaction processing
systems.
2. Outputs go to users and other
transaction processing systems.
3. Transaction processing system files and
databases store data about the state of the
organization.
4. Transaction processing system software accepts
data about transactions, processes it, makes
changes in stored data, and produces the
outputs
 Activities of TPS

 First, data are collected & entered into the computer via any input device.

 The system then processes data in one of the following ways:

Batch processing= the firm collects data from transactions as they

occur, placing them in groups or batches. The system then
processes the batches periodically

Online processing = data are processed as soon as a transaction

occurs.

Hybrid system (a combination of batch & online processing) collects

data as they occur but process them at specified intervals.

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 Traditional Transaction Processing
Methods & Objectives
• Batch processing systems
• On-line transaction processing (OLTP)
• On-line entry with delayed processing
• Process data generated by and
about transactions
• Process data generated for and about
transactions
• Maintain a high degree of accuracy
and integrity
• Produce timely documents & reports
 Batch processing systems
• All transactions for a period of time would
be collected in a group (called a batch),
input & processed as a unit.

• Data for all transactions to be processed is

brought together and processed in a
group (Payroll).

• This was normally done at regular

intervals, such as every hour, day, or
week.
 Batch processing systems
• The biggest problem with batch processing is
that the master file is never current.

• Good for some applications, such as processing

end of semester grades or payroll, it is
unacceptable for others, such as financial
transactions.

• Problems that would arise if your bank only

processed deposits and withdrawals once a day!

• However, batch processing is fast and cost

effective for many applications.
Batch Transaction Processing
On-line transaction processing (OLTP)
• Online transaction processing is interactive &
each transaction is processed as it occurs.
• Files are always current when online processing
is used.
• The drawback to OLTP is the high costs
associated with the necessary security &
fault tolerance features.
• A person enters the data for a transaction into a
system, where it is processed and the output
is received before the next input is entered
(airlines)
 On-line entry with delayed processing
• When online entry with delayed processing is
used, data is input as the transaction occurs and
is stored online, but files are not updated.
• Files are updated later in batch.
• For example, orders taken over the phone may
be entered into the system, but not processed
until a slow time, such as at night.
On-Line Transaction Processing
 Traditional Transaction Processing
Methods & Objectives

• Increase labor efficiency

• Help provide improved service
• Help build and maintain customer loyalty
• Achieve competitive advantage
 Transaction Processing System
Functions

Input function Processing function: Output function:

• Capture input data • perform computation • produce screen output

• Enter input data • make decision • print output
• Validate input data

Storage function:

• stored data
• Access data
• Update data
• Transaction processing systems perform input,
output, storage, and processing functions.

• Input functions include capturing data on a

source document, entering the input data into
the system, and checking input data for errors, a
process called data validation

• Output functions include producing screen or

paper reports, such as detail reports, summary
reports, and exception reports.
• Storage functions include storing data in files and
databases ,accessing stored data, sorting
stored data, and updating stored data.

• Processing functions involve the manipulation of

data, including computation and decision making
Transaction Processing Systems
Integration of a Firm’s TPSs
 Order Processing Systems

• Order entry
• Sales configuration
• Shipment planning
• Shipment execution
• Invoicing
• Customer relationship management (CRM)
• Routing and scheduling
• Scheduling systems
 Order Entry System

Processing function:
Input function
Output function:
• check inventory quantity
•Accept customer
• Check customer credit • produce sales order
order data

Storage function:

•Storage customer order data

•Access inventory master data
•Access customer order data
• The purpose of an order entry system is to
accept customer orders for goods and services
and to prepare the orders in a form that can
be used by the business.
• If sufficient inventory is on hand and the
customer’s credit rating is acceptable, a sales
order, which is the output from the system, is
produced by the program.
• This document contains the customer number,
name, and shipping address from the customer
master data; the item and the description from the
inventory master data; and the quantity ordered
from the customer order data.
 Example of TPS
• An inventory control system keeps a file of records about
the stock of goods that a business has on hand (the
inventory) which is one aspect of the state of the
business.

• When items are shipped or received, the state of the

business is affected, and the inventory control system
makes changes about the inventory in the stored records.

• Periodically, the system prints a list of the shipments and

receipts - that is the transactions that have occurred.
• It also prints a report giving the quantity on hand
for each item in inventory, which is a characteristic
of the state of the business.
• Finally, when inventory is low, the system
produces output that causes more inventory to be
ordered, which is another type of business
transaction.
Examples of TPS
Examples of TPS
 Benefits of Internet Transaction Processes
 Flexibility to accommodate unpredictable growth in processing
demand.
 Cost effectiveness for small dollar amounts.
 Interactive, automatic billing, enabling companies to
services to anyone, not just subscribers.
offer
 Timely search and analysis of large databases.
 Ability to handle multimedia data such as pictures and sound
effectively and efficiently.
 High data throughput to support inquiries requiring massive file
size.
 Fast response time.
 Effective storage of huge graphics and video databases.
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