Principles of Business Information Systems - Chapter 07: Operational Systems Study Notes

Principles of Business Information Systems

Chapter Overview

• Addressed in Chapter 07: Operational Systems.
• Prepared by Rand Younis.

Importance of Information Systems

• Organizations must have information systems to:
  • Support routine, day-to-day activities in business operations.
  • Help add value to products and services.

Transaction Processing Systems (TPS)

• Traditional TPS are crucial for organizations not using Enterprise Resource Planning (ERP) systems.
• Functions of TPS:
  • Support various business functions.
  • Enable electronic and mobile commerce to facilitate transactions by customers, minimizing the need for sales staff.
  • Provide a foundation for implementing integrated ERP systems that offer numerous business benefits.

Types of Business Information Systems

• Main types discussed include:
  • Operational Systems.
  • Management Information and Decision Support Systems.
  • Executive Support Systems.
• An enterprise-wide system (ERP) can perform functions traditionally divided across multiple systems.

Enterprise Resource Planning (ERP)

Definition

• ERP: A set of integrated programs managing vital operations for a global, multi-site organization.
  • Source: Ippolito, J. (2022).

Functions and Levels

• ERP operates at all levels of business information systems, executing functions typical of each system.

Advantages of ERP Systems

1. Improved Data Access
   • Enhanced access for operational decision-making through an integrated database.
2. Elimination of Legacy Systems
   • Replacement of outdated systems, often poorly documented and unsupported.
3. Enhanced Work Processes
   • Optimization based on best practices in the industry.
4. Technological Upgrades
   • Opportunity to modernize IT infrastructure—including hardware, operating systems, and databases—reducing maintenance and training costs.

Disadvantages of ERP Systems

1. Implementation Costs and Time
   • Significant expense and time commitment required during implementation.
2. Organizational Challenges
   • Organizational processes may need drastic changes, which can be unsettling for long-time employees.
3. Integration Issues
   • Challenges in merging ERP with existing systems.
4. Data Transition Challenges
   • Difficulties in migrating data to the new system.
5. Vendor Risks
   • Risks associated with relying on one vendor who may not keep up with technological advances.
6. Implementation Failures
   • Potential for large ERP projects to fail, leading to expensive rectification measures.

Operational Systems

Definition

• Systems focused on managing daily operations within an organization.

Examples

• Transaction Processing Systems (TPS)
• Supply Chain Management Systems
  • Systems responsible for procurement and supply management.
• Customer Relationship Management Systems (CRM)
  • Systems dedicated to managing customer interactions and relationships.

Transaction Processing Systems (TPS) Overview

• Essential in every organization, TPS applications include:
  • Order Processing.
  • Purchasing.
  • Accounting.

TPS Functions

• TPS process crucial data required for record updates related to business operations, including:
  • Inputs such as customer orders, employee purchases, customer payments, and employee time logs.
  • Processing steps involving data collection, editing, correction, manipulation, storage, and document production.

Results of TPS

• Updates organizational records to reflect real-time operational status.
• Data collected feeds into:
  • Management Information Systems (MIS).
  • Decision Support Systems (DSS).
  • Other specialized information systems.

Traditional Methods of Transaction Processing

1. Batch Processing System
   • Transactions accumulated over time and processed together.
   • Causes delays due to accumulation before processing.
2. Online Transaction Processing (OLTP)
   • Each transaction is processed immediately with no delays.

Transaction Processing Cycle

1. Data Collection
   • Capture and gather necessary data for transaction processing.
   • Can be manual or automated (e.g., scanners, point-of-sale devices).
   • Must be accurate and timely.
2. Data Editing & Correction
   • Editing: Validity and completeness checks for data quality (e.g., numeric for quantity).
   • Correction: Re-entering any erroneous data and using detection tools for issues.
3. Data Manipulation
   • Calculations and transformations of transaction-related data.
   • Includes classifying, sorting, calculating, and summarizing data.
4. Data Storage
   • Updating databases with new transaction data for later processing.
5. Document Production
   • Generating output records, including reports in hard copy or screen displays.

Trends in Transaction Processing

• Traditional TPS require substantial staff involvement.
• E-commerce systems facilitate transactions with reduced staff dependency, enhancing business opportunities.

Electronic and Mobile Commerce

• E-commerce: Business transactions conducted electronically, primarily via the Internet.
• Mobile commerce (M-commerce): Transactions performed using wireless devices.

Types of E-commerce

1. B2C (Business to Consumer)
   • Direct transactions between businesses and consumers.
2. B2B (Business to Business)
   • Transactions exclusively between organizations.
3. C2C (Consumer to Consumer)
   • Interactions allowing consumers to sell to other consumers (e.g., eBay).

Customer Relationship Management (CRM)

Function of CRM Systems

• Manage all aspects of customer interactions and engagements.
• Accessible via various devices, including mobile.

Goals of CRM Systems

• Anticipate customer needs and improve retention and loyalty.
• Optimize sales and enhance product/service delivery.
• Increase customer satisfaction, reduce operating costs, and streamline marketing and advertising efforts.

Conclusion

• Comprehensive overview of operational systems, emphasizing TPS, ERP systems, and CRM, outlines their significance and interconnections in contemporary business environments.