Transaction Processing Systems

Transactions
 Transactions…
• Basic business operations such as customer orders,
purchase orders, receipts, time cards, invoices, and
payroll checks in an organization
 Transaction processing systems (TPS)
• Perform routine operations and serve as a
foundation for other systems
 Batch vs. On-Line Transaction
Processing
 Two types of TPS:
 Batch processing
• A system whereby business transactions are
accumulated over a period of time and prepared
for processing as a single unit or batch
 On-line transaction processing (OLTP)
• A system whereby each transaction is processed
immediately, without the delay of accumulating
transactions into a batch
 Batch Schematic

Data entry
Input
of accumulated Output
transactions
(batched)
 On-line Schematic

Terminal
Terminal Terminal

Output

Terminal
Immediate
processing
of each
transaction

Terminal
Terminal
 Integration of TPSs

[ ]x n =
Applications
software

People

Schematic
 Objectives of TPS
 Process data generated by and about transactions
 Maintain a high degree of accuracy
 Ensure data and information integrity and accuracy
 Produce timely documents and reports
 Increase labour efficiency
 Help provide increased and enhanced service
 Help build and maintain customer loyalty
 Achieve competitive advantage
 Simplified Overview of a
Transaction Processing System

Schematic
Data entry & input

Documents
Processing
& reports

Documents:
Documents:
Internally
Internallygenerated
generated
transactions: •• pick
picklist
list
transactions:
Database •• cheques
••shipped
shippedorders
orders chequestotovendors
vendors
••purchase •• receiving
receivingnotices
purchaseorders
orders notices
Database
Databaseupdate:
update: •• paycheques
••employee
employeetime
timecards
cards paycheques
••customer
customerorders
orders
Externally
Externallygenerated
generated Operational
Operationalreports:
reports:
transactions:
transactions: ••inventory
inventory •• finished
finishedproduct
product
••customer
customerorders
orders ••purchase
purchaseorders
orders inventory
inventorystatus
status
••vendor ••customers •• raw
rawmaterials;
materials;packing
vendorinvoices
invoices customers packing
materials;
materials;spare
spareparts;
parts;
••customer
customerpayments ••suppliers
suppliers inventory
payments inventorystatus
status
 Data Processing Activities
Common to TPSs
 A transaction processing cycle
• Data collection
• Data editing
• Data correction
• Data manipulation
• Data storage
• Document production

Schematic
 Original data

Data
collection

Data
edit

Data
Data manipulation
correction

Data
storage

Document
production
 Source Data Automation
 Source data automation
• The process of capturing data at its source with
minimal manual effort
• Data are entered directly into the computer
 Point-of-Sale Transaction
Processing System
Customer’s
receipt Management Exception
Inventory information report
database system
UPC and
Point-of-sale quantity
UPC transaction
Scanner
Quantity, processing
Date, system Item, quantity,
time date, time, price

UPC Price Purchases

database

Item
database
 Control and Management Issues
 Business resumption planning
• The process of anticipating and providing for disasters.
 Disaster recovery
• The implementation of the business resumption plan.
 Transaction processing system audit
• An examination of the TPS in an attempt to answer three basic
questions
– Does the system meet the business need?
– What procedures and controls have been established?
– Are the procedures and controls being properly used?
 Traditional TPS –
Order Processing
 Order processing
 Processing an order from entry to delivery,
including traditional accounting transactions

Schematic
Invoice
Customer
Products Customer order in person or via
mail, phone, EDI, internet

Inventory status Order entry/

sales configuration

Orders
Planned
Finished Shipment shipments
product Routing
planning
inventory
Pick list Planned
shipments
Shipment & routes
execution

Shipped orders Scheduling

Invoicing
Data Flow Diagram of an Order
Entry System

Schematic
D6 Inventory D1 Products/prices D2 Customer payment history
Product numbers, Products, price
inventory levels information Credit status

2. Verify
Open
1. Collect product
Orders Orders 3. Authorize orders
order numbers
credit
D3 New orders
info & stock
on hand
Rejected,
partly filled
orders

Back
Back orders 4. Notify orders
customer
D4 Back orders

Customer notification
Customer Rejected
orders

D5 Rejected orders
 Order Processing Support Systems -
Sales Configuration
 Sales configuration
• Ensures that products and services ordered are
sufficient to accomplish customer’s objectives and
will work well together
 Order Processing Support Systems -
Shipment Planning
 Shipment planning
• A system that determines which open orders will be
filled and from which location they will be shipped
• E.g., (from Figure 8.9)
LOC LINK ITEM NUMBER DESCRIPTION ORDERED SHIPPED BO

8 105 10 L1L16028 FASENTING TOOL 3 EACH 3

20 S8276 STAPLE ¾ INCH 15 CASE 15
30 S8279 STAPLE 1 INCH 15 CASE 12 3
40 SHIPPING CHARGE
 Order Processing Support Systems -
Shipment Execution
 Shipment execution
• A system that coordinates the outflow of all
products and goods from the organization, with the
objective of delivering quality products on time to
customers
 Order Processing Support Systems -
Inventory Control
 Inventory control
• A system that updates the computerized inventory
records to reflect the exact quantity on hand of each
stock keeping unit
• Status reports
– Summarize all inventory items in stock, or shipped over a
specified period of time
• E.g., see Figure 8.10
 Order Processing Support Systems -
Invoicing
 Invoicing
• Generates customer invoices based on records
received from the shipment execution TPS
• E.g., see Figure 8.11
 Order Processing Support Systems -
Customer Interaction System

 Customer interaction
• A system that monitors and tracks each customer
interaction with the company
 Customer

Request Problem, idea,

Other
for Sale request for
contacts
proposal information

Customer
interaction
system

Market Product
research development

Sales Quality
control
Marketing
 Order Processing Support Systems -
Routing and Scheduling
 Routing
• A system that determines the best way to get goods
and products from one location to another
 Scheduling
• A system that determines the best time to deliver
goods and services
Purchasing System

Schematic
 Raw materials
Packing materials
Spare parts
Inventory control
Inventory control
Purchase status report
order
request Purchase order
Employees
processing
Purchase
order
Purchase
order

Material
Receiving Supplier

Receiving Invoice
notice

Accounts Cheque
payable
 Purchasing System
 Inventory control
• Maintains stock of items such as raw materials, packing materials,
spare parts, and supplies
 Purchase order (P.O.) processing
• A system that helps purchasing department complete transactions
quickly and efficiently
 Receiving
• A system that creates a record of expected and actual receipts
• Reconciles purchase orders with what is actually received
 Accounts payable
• A system that increases an organization’s control over purchasing,
improves cash flow
• increases profitability, and provides more effective management of
current liabilities
 P.O. Example
 (Click to view)
 Accounting System
 Accounting systems
 Consist of…
• Budget
• Accounts receivable
• Accounts payable
• Payroll
• Asset management
• General ledger
 Accounts Payable Example
 (Click to view)
Financial Systems

Schematic
 Asset
Customer
management

Cost of assets
Payments
Accounts Accounts
receivable payable

Amounts owed by customers Amounts owed by company

Amounts paid by customers Amounts paid by company

Labour costs General

Payroll
ledger Asset depreciation

Paycheques Expense
Time transactions
cards

Customer Budget
 Financial Systems -
Accounts Receivable
 Accounts receivable
• A system that manages the cash flow of the
company by keeping track of the money owed the
company on charges for goods sold and services
performed
‘Statement of Account’ Example
 (Click to view)
 Financial Systems –
Accounts Receivable
 Accounts receivable aging report
• Tells managers what bills are overdue, either
customer by customer or in a summary format
 ‘Aging Report’ Example
 (Click to view)
 Financial Systems - Payroll

 Payroll…
• Generates payroll checks and stubs, as well as W-2
statements at the end of the year for tax purposes
 Financial Systems - Payroll

 Payroll journal
• Helps managers monitor total payroll costs for an
organization and the impact of those costs on cash
flow
 Financial Systems -
Asset Management
 Asset management transaction processing
system
• A system that controls investments in capital
equipment and manages depreciation for maximum
tax benefits
Financial Systems - General Ledger