CHAPTER 8. ORGANIZATIONAL INFORMATION SYSTEMS
TRANSACTION PROCESSING SYSTEMS
Transaction – any business event that generates data worthy of being captured and stored in a
Transaction processing systems (TPSs) monitor, collect, store, and process data generated from
all business transactions.
• Inputs to functional area information systems, decision support systems, customer
relationship management, knowledge management, and e-commerce.
• Handle high volume and large variations in volume efficiently
• Avoid errors and downtime,
• Record results accurately and securely
• Main privacy and security
Standard process of TPS-
• Data are collected by people/sensors, entered into the computer via an input device. Use
source data automation for TPS data entry of large volume
• System processes data in one of the two ways-
1. Batch processing-firm collects data from transactions as they occur, placing them in
groups or batches. The system then prepares and processes the batches
2. On-line processing/real-time transaction processing-business transactions are
processed on-line as soon as they occur.
FUNCTIONAL AREA INFORMATION SYSTEMS (FAISs)
Provide information primarily to lower and middle level managers in the various functional areas,
to help plan, organize, and control operations, through reports.
Purpose-increasing internal efficiencies and effectiveness.
Information systems for accounting and finance
Primary mission: manage money flows into, within, and out of organizations.
Financial planning and budgeting: purpose: planning, budgeting, acquisition and
I. Financial and economic forecasting: knowledge about the availability and cost of
money –used for successful financial planning. Cash flow projections are particularly
important, because they tell organizations what funds they need and when, and
how they will acquire them. Decision about funding-ongoing operations and for capital investment supported by
Decision support systems, business intelligence applications, expert systems
II. Budgeting: annual budget allocates organization’s financial resources among
participants and activities, in the best way supporting organization’s missions and
Managing financial transactions: Peachtree by sage- sales ledger, purchase ledger, cash
book, sales order processing, invoicing, inventory control, fixed assets register, eg.
Canadian payroll software.
E-commerce financial transactions-accessing customer’s financial data, inventory levels,
manufacturing databases. Others-
1. Global stock exchanges-use of internet to buy and sell stocks and broadcast real-time
2. Managing multiple currencies-global trades involves financial transactions-multiple
currencies- conversion ratio changes. Financial/accounting system, collects data, convert,
report within seconds, in multiple languages.
3. Virtual close-organizations close their books quarterly as per regulations. Modern
organization-close anytime on short notice. Ability to close quickly-virtual close.
4. Expense management automation (EMA) - systems that automate data entry and
processing of travel and entertainment expenses, quickly and consistently collect expense
information, enforce company policies and contracts, reduce unplanned purchase or travel
expenses, and reimburse employee expenses quickly.
Investment Management: problem:
1. Thousands of investment alternatives and dispersed.
2. Subject to complex regulations and tax laws
3. Manager need to evaluate financial and economic reports provided by diverse
To monitor, interpret, analyze huge online financial data- two major IT tools-
1. Internet search engines
2. Business intelligence and decision support software
Control and Auditing: survival depends on-ability to forecast and secure sufficient cash
Need for effective control, several forms of control:
1. Budgetary control: annual budget divided into monthly allocations. Managers
monitor departmental expenditures with planned budget and operational progress 2. Internal auditing: institute of internal auditors (IIA) –independent, report to audit
committee of board of directors, evaluate controls, evaluate risk assessment,
3. Financial ratio analysis: assess company’s health- liquidity ratios(availability of cash
to pay debt),activity ratios( how quickly it converts non-cash assets to cash assets),
debt ratio( ability to repay long-term debt), profitability ratios( firm’s use of its
assets and control of its expenses to generate on acceptable rate of return)
INFORMATION SYSTEMS FOR MARKETING
Understand customers’ needs and wants to develop marketing and advertising strategies.
INFORMATION SYSTEMS FOR PRODUCTION/OPERATIONS MANAGEMENT
POM: processes that transform inputs into useful outputs and for the operation of the business.
Four important POM functions-management of organization’s supply chain:
In-house logistics and materials management: logistics –ordering, purchasing, receiving
(inbound) and shipping activities (outbound).
• Inventory management: overstocking- expensive due to storage cost, costs of
Under stocking-expensive, last minute orders, lost sales.
2 basic decisions-when to order and how much to order- inventory model (economic
order quantity EOQ)
Vendor-management inventory (VMI) - organizations allow suppliers to monitor
inventory levels and ship when products are needed.
• Quality Control: provide information about the quality of incoming materials, parts,
and in-process semi-finished products and final finished products.
Record results of all inspections, compare results, generate periodic reports.
Information can be collected and stored in database for future references.
Planning production and operations:
• Material requirement planning(MRP)- Planning process that integrates production,
purchasing, and inventory management of interdependent items .PRODUCT
SCHEDULING AND INVENTORIES
• Manufacturing resource planning (MRP II)-more complex, integrated software-
integrates firm’s production, inventory management, and purchasing, financing and
Enterprise resource planning (ERP)
Economic order quantity (EOQ) - used when items demand is independent of other
But some demands are interdependent.
Computer-integrated manufacturing (CIM)/ digital manufacturing: approach to integrate
various automated factory systems. 3 basic goals
1. Simplify manufacturing technologies and techniques
2. Automate as many of the manufacturing processes
3. Integrate and co-ordin