Chapter 8 – Organizational
TRANSACTION PROCESSING SYSTEMS – a transaction is a business even that generates
data worthy of being captured and stored in a database. Transaction Processing Systems or
TPSs collect and store data generated from transactions. TPSs must handle both low and high
volume data and maintain privacy and security. Organizations try to automate TPS due to the
large volume of data involved, a process called source data automation. Data is processed via
batch processing, in which data is placed in batches. The batches are processed periodically.
The other method is online processing or OLTP, where processing happens as soon as
FUNCTIONAL AREA INFORMATION SYSTEMS – FAIS provide information to lower and
middle level managers in various functional areas. The information is used to organize and plan
Information Systems for Accounting and Finance – these systems are diverse and
comprehensive due to the amount of money flow in and out of organizations. The activities of
the accounting and finance functional area are:
• Financial planning and budgeting – appropriate management of financial assets is a
o Financial and economic forecasting – cash flow projections tell the company
when and why they need the money. Knowledge about money is a key ingredient
in financial planning. These decisions can be supported by expert systems and
also software packages
o Budgeting – the annual budget allocated the financial resources. It helps
distribute the resources in the organization. Software packages can help support
• Managing Financial Transactions – accounting and finance software are integrated with
other functional areas.
• Investment management – managing investments is a complex task because there are
many different investment alternatives and often subjected to regulation and tax laws
which vary. Internet search engines and business intelligence support software can be
• Control and Auditing – firms must be able to forecast efficiency to stay in business.
o Budgetary control – budget is divided into monthly budget and expenditures must
be monitored o Auditing – to monitor how the money is being spent, and to assess the financial
o Financial ratio analysis – monitor financial health through accounting ratios such
as liquidity ratios, activity ratios, and debt ratios.
Information Systems for Marketing – companies must understand its customers’ needs and
wants and develop its marketing strategy around them. IS provides many different types of
support to the marketing function.
Information Systems for Production/Operations Management – POM is responsible for
processes that transform inputs into useful outputs. Its main functions are:
• In-House Logistics and Materials Management – this deals with ordering, purchasing,
receiving and shipping activities.
o Inventory management – determines how much inventory to keep. Cost of
storing can be high but so is not keeping enough inventory. Some companies use
the vendors to monitor supply levels which eliminates the need to submit
o Quality control – this provides information about the quality of the products. They
also give reports about the percentage of defects, and rework etc.
• Planning Production and Operations – in some companies POM planning is supported
by IT. Planning process that integrates production, purchasing, and inventory
management of independent items is called material requirements planning (MRP).
Manufacturing resource planning (MRP II) integrates a firm’s production, inventory
management, purchasing, financing, and labor activates. It adds functions to the regular
• Computer-Integrated Manufacturing – CIM is also called digital manufacturing. It
simplifies manufacturing techniques, automates as many of the processes, integrates
and coordinates all aspects of design and manufacturing via computer systems.
• Product Life Cycle Management – it is a business strategy that enables manufacturers to
share product-related data to support product design and development and supply chain
operations. It helps form a single team that