Define and explain the role of Transaction Processing Systems (TPS)
Transaction Processing System (TPS) monitor, collect, store, and process data generated from all business transactions.
o These pieces of data are inputs to the organization's database. In the modern business world, they also are inputs
to the functional information systems, decision support systems, customer relationship management, knowledge
management, and e-commerce.
o TPSs have to handle high volume and large variations in volume (for example, during peak times) efficiently, avoid
errors and downtime, record results accurately and securely, and maintain privacy and security.
o Avoiding errors is particularly critical, because data from the TPSs is input into the organization's database and
must be correct
o Regardless of the specific data processed by a TPS, a fairly standard process occurs, whether in a manufacturing
firm, a service firm, or a government organization.
First, data is collected by people or sensors, and entered into the computer via an input device. Generally
speaking, organizations try to automate the TPS data entry as much as possible because of the large
volume involved, a process called source data automation.
Next, the system processes data in one of two basic ways: batch processing or online processing. (see next ?)
Understand the two basic ways that systems process data
In batch processing, the firm collects data from transactions as they occur, placing it in groups or batches. The system then
prepares and processes the batches periodically (say, every night).
Traditional TPSs are centralized. In Real Time Transaction Processing, business transactions are processed online as soon as
o For example, when you pay for an item at a store, the system records the sale by reducing the inventory on hand
by a unit, increasing the store's cash position by the amount you paid, and increasing sales figures for the item by
one unit—by means of online technologies and in real time.
Describe and explain the role and use of functional area information systems (FAIS)
functional area information systems (FAIS) provide information mainly to lower- and middle-level managers in the
o The managers use this information to help them plan, organize, and control operations.
o The information is provided in a variety of reports.
o the FAISs access data from the corporate databases. However, to create management reports the FAISs also use
data from external databases.
Be able to discuss the different functional activities that are supported by an FAIS
Typical function-specific systems are accounting, finance, marketing, production/operations (POM), and human resources
management. (LOOK AT TABLE 8.1!!!)
Describe the three types of reports that are generated by an FAIS and be able to provide examples
and applications of these reports
Routine Reports are produced at scheduled intervals.
o They range from hourly quality control reports to daily reports on absenteeism rates.
o Although routine reports are extremely valuable to an organization, managers frequently need special information
that is not included in these reports.
Other times they need the information but at different times (“I need the report today, for the last three days, not for one
week”). Such out-of-the routine reports are called Ad Hoc Reports.
o Ad-hoc reports also can include requests for the following types of information:
Drill down reports – show greater detail (sales by stor)e and sales by salesperson
Key indicator reports – summarize the reports of critical activities (cash flow and cash on hand haha bubbles)
Comparative reports – comparing reports of different business units
Exception reports include only information that falls outside of certain threshold standards.
o To implement management by exception, management first creates performance standards. The company then
sets up systems to monitor performance (via the incoming data about business transactions such as expenditures),
compare actual performance to the standards, and identify predefined exceptions.
o Managers are alerted to the exceptions via exception reports.
Be able to discuss the level within the organization that provides the primary users of each type of
Define and describe an Enterprise Resource planning (ERP) system
Enterprise Resource planning (ERP) system integrate the planning, management, and use all of an organization's resources.
o The major objectives of ERP systems are to tightly integrate the functional areas of the organization and to enable
information to flow seamlessly across the functional areas.
o Tight integration means that changes in one functional area are immediately reflected in all other pertinent
o ERP systems provide the information necessary to control the business processes of the organization.
A business process is a set of related steps or procedures designed to produce a specific outcome.
Business processes can be located entirely within one functional area, such as approving a credit card
application or hiring a new employee.
They can also span multiple functional areas, such as fulfilling a large order from a new customer.
Customer relationship management and supply chain management, discussed in the next two
sections, are examples of business processes (and thus of information systems) that span
multiple functional areas.
Be able to discuss the advantages and disadvantages of an ERP system
o Read Case 8.1 for advantages
o To begin with, they can be extremely complex, expensive, and time consuming to implement.
o Also, as we saw in the IGT case, companies may need to change existing business processes to fit the predefined
business processes of the software. For companies with well-established procedures, this requirement can be a
o Finally, companies must purchase the entire software package even if they require only a few of the modules. For
these reasons, ERP software is not attractive to everyone.
Understand how an ERP facilitates the operation and control of an entire business process and
which ERP modules support different business processes
ERP software includes a set of interdependent software modules, linked to a common database that provides support for
the internal business processes in the following functional areas: finance and accounting, sales and marketing,
manufacturing and production, and human resources.
The modules are built around predefined business processes, and users access them through a single interface.
The business processes in ERP software are often predefined by the best practices that the ERP vendor has developed.
Best Practices are the most successful solutions or problem-solving methods for achieving a business objective.
The following business processes are supported by ERP modules:
o Financial and accounting processes: general ledger, accounts payable, accounts receivable, fixed assets, cash
management and forecasting, product-cost accounting, cost-centre accounting, asset accounting, tax accounting,
credit management, financial reporting o Sales and marketing processes: order processing, quotations, contracts, product configuration, pricing, billing,
credit checking, incentive and commission management, sales planning
o Manufacturing and production processes: procurement, inventory management, purchasing, shipping, production
planning, production scheduling, material requirements planning, quality control, distribution, transportation,
plant and equipment maintenance
o Human resources processes: personnel administration, time accounting, payroll, personnel planning and
development, benefits accounting, applicant tracking, compensation, workforce planning, performance
Describe the basic characteristics of CRM (customer relationship management) and SCM (supply
chain management) systems
CRM (customer relationship management is an enterprisewide effort to acquire and retain customers.
o CRM recognizes that customers are the core of a business and that a company's success depends on effectively
managing its relationships with them.
o CRM focuses on building long-term and sustainable customer relationships that add value both for the customer
and the company.
o CRM includes a one-to-one relationship between a customer and a seller.
To be a genuine one-to-one marketer, a company must be willing and able to change its behaviour toward
a specific customer, based on what it knows about that customer.
o In essence, CRM is based on a simple idea: Treat different customers differently. For example, “good” customers
account for about 80 percent of a company's profits, but they account for only 20 percent of its customers.
SCM (supply chain management) is to plan, organize, and optimize the supply chain's activities.
o Like other functional areas, SCM utilizes information systems.
o The goal of SCM systems is to reduce friction along the supply chain.
o Friction can involve increased time, costs, and inventories as well as decreased customer satisfaction.
o SCM systems, then, reduce uncertainty and risks by decreasing inventory levels and cycle time and improving
business processes and customer service.
o All of these benefits contribute to increased profitability and competitiveness.
Describe an Inter-organisational Information System (IOS) and the issues associated with global
Inter-organisational Information System (IOS) involves information flows among two or more organizations.
o By connecting the information systems of business partners, IOSs enable the partners to perform a # of tasks:
reduce the costs of routine business transactions
improve the quality of the information flow by reducing or eliminating errors
compress the cycle time involved in fulfilling business transactions
eliminate paper processing and its associated inefficiencies and costs
make the transfer and processing of information easier for users
ISSUES IN GLOBAL IOS DESIGN
Interorganizational systems that connect companies located in two or more countries are referred to as Global Info
Systems. Regardless of its structure, a company with global operations relies heavily on IT. The major benefits of global
information systems for such organizations are effective communication at a reasonable cost and effective collaboration
that overcomes differences in distance, time, language, and culture.
The task of designing any effective IOS is complicated. It is even more complex when the IOS is a global system, because of
differences in cultures, economies, and politics among parties in different countries. Some countries are erecting artificial
borders through local language preference, local regulation, and access limitations. Some issues to consider in designing
global IOSs are cultural differences, localization, economic and political differences, and legal issues.
o CULTURAL DIFFERENCES
Culture consists of the objects, values, and other characteristics of a particular society.
It includes many different elements ranging from tradition to legal and ethical issues to what types of
information are considered offensive.
When companies plan to do business in countries other than their own, they must consider the cultural
Many companies use different names, colours, sizes, and packaging for their overseas products and services. This practice is referred to as localization, which means that products and services are modified
for each locality.
In order to maximize the benefits of global information systems, the localization approach also should be
used in the design and operation of such systems.
For example, many websites offer different language and/or currency options, as well as special
o ECONOMIC AND POLITICAL DIFFERENCES
Countries also differ considerably in their economic and political environments. One result of such
variations is that IT infrastructures often differ from country to country.
For example, many countries own the telephone services or control communications systems
o For example, France insisted for years that French should be the sole language on
French websites. The country now permits websites to use other languages, but French
still must appear in every site. China goes even further. The Chinese government
controls the content of the Internet and blocks many websites from being viewed in the
o LEGAL ISSUES
Legal systems differ considerably among countries.
As a result, laws and rules concerning copyrights, patents, computer crimes, file sharing, privacy, and data
transfer vary from country to country.
All of these issues can affect what information is transmitted via global systems. For this reason,
companies must consider these issues when they establish a global IS.
The impact of legal, economic, and political differences on the design and use of global information systems can be clearly
seen in the issue of cross-border data transfer. The term trans border data flow refers to the flow of corporate data across
o Several countries, such as Canada and Brazil, impose strict laws to control this transfer.
o These countries usually justify their laws as protecting the privacy of their citizens, because corporate data
frequently contains personal information. Other justifications are protecting intellectual property and keeping jobs
within the country by requiring that data processing be done there.
Be able to explain how CRM systems benefit both the customer and organizations
Understand customer touch points and how a CRM provides applications that facilitate customer
interaction within three major touch point areas
customer touch point is a method of interaction with a customer, such as telephone, e-mail, a customer service or help
desk, conventional mail, a website, or a store.
Properly designed CRM systems provide a single, enterprisewide view of each customer.
These systems also provide customers with a single point of contact within the enterprise as well as a unified view of the
CRM systems provide applications in three major areas: sales, marketing, and customer service. Let's take a look at each
Sales force automation (SFA) functions in CRM systems make salespeople more productive by helping
them focus on the most profitable customers.
SFA functions provide data such as sales prospect and contact information, product information, product
configurations, and sales quotes.
SFA software can integrate all the information about a particular customer so the salesperson can put
together a personalized presentation for that customer.
CRM systems support marketing campaigns by providing prospect and customer data, product and service
information, qualified sales leads, and tools for analyzing marketing and customer data. In addition, they
enhance opportunities for cross-selling, up-selling, and bundling.
Cross selling refers to the marketing of complementary products to customers.
o For example, a bank customer with a large balance in his or her chequing account