Transaction Processing Systems Notes

An Overview of Transaction Processing Systems

Transaction Processing Systems (TPS) - Operational Level

• A transaction is any business-related exchange (e.g., payments to employees, sales to customers, payments to suppliers).

• A Transaction Processing System (TPS) is an organized collection of people, procedures, software, databases, and devices used to record completed business transactions.

• Understanding a TPS involves understanding basic business operations and functions.

TPS - Role of Bottom Managers

• Bottom managers (e.g., a manager at a supermarket) must identify, collect, and register all transactions and events when sales are made and when goods are shipped.

• Financial data on account receivables/payables, payrolls, and cash receipts must be recorded as they occur.

TPS as Operational Information Systems

• TPS supports the most fundamental, basic business operations of the organization by recording every detail of each transaction.

• TPS can be manual or automated.

• TPS represents the earliest use of computers to reduce costs by automating routine, repetitive, labor-intensive business procedures.

• Examples include:

  • ATMs

  • Supermarket check-out cashiers

  • Use of smart card technology in transportation

  • Fast food stores

A Payroll Transaction Processing System

(Note: The transcript mentions a payroll transaction processing system without further details at this point.)

Benefits of Automated TPS

• Reduced cost: less labor/personnel.

• Increased speed (operational efficiency): processing is faster.

• Increased accuracy: fewer typing mistakes, error-free input and processing.

• Increased quality customer service: faster response to customer’s queries or needs, 24-hour access to information.

• Increased data for decision-making: serves as the foundation for DSS (Decision Support Systems); as TPS collects & stores all transactional data into the databases.

Traditional Transaction Processing Methods by Computers

• Batch processing: Transactions are accumulated over a period of time and prepared for processing later as a single unit. This introduces a time delay between the occurrence of a transaction and its actual processing.

• On-line transaction processing (OLTP): Each transaction is processed immediately, and the affected records are updated instantly.

Examples of On-Line Processing

• Stock market exchange: Transactions of buying/selling of stocks are processed instantly.

• Airline reservation systems, especially budget airline tickets sold on airline websites.

• Gambling: Soccer or horse racing bets placed on websites and processed immediately.

• Suitable for more urgent transactions that require data to be updated quickly.

Batch versus On-Line Processing

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Data Processing Activities Common in all TPSs

(Note: This section introduces data processing activities without specifics at this point.)

Data Collection in TPS

• Captures and gathers all necessary data to complete transactions.

• Data must be recorded at its source accurately, in a timely fashion, and automatically with minimal manual effort.

• Automated input devices:

  • Barcode scanners at libraries

  • Point-of-sale cashiers at supermarkets

Data Editing in TPSs

• Detects errors in input data.

• Performs validity and completeness checking in input data.

• Examples:

  • Quantity and cost data must be numeric.

  • Names must be alphabetic.

Data Correction in TPSs

• If input data is invalid, the TPS should provide appropriate error messages so that corrections can be made.

• Data correction involves re-entering mis-keyed or mis-scanned data.

Data Manipulation in TPSs

• The actual processing inside the TPS involves calculations and data transformations related to the transactions.

• Examples:

  • Classifying data

  • Sorting data into categories

  • Performing calculations

  • Summarizing results

Data Storage in TPSs

• Update one or more databases with new transactional data.

• Once the update process is complete, this data can be further processed and used by other types of information systems (e.g., MIS, DSS) for tactical decision-making or strategic planning.

Document or Report Production in TPSs

• TPSs produce important business documents about the transactions.

• Documents can be hard copies or displayed on computer screens.

• Examples:

  • Paychecks from a payroll system

  • Receipts from an order processing system

  • Outstanding balance reports for invoices from an accounts receivable TPS

Characteristics of TPS

• Repetitive: Transactions repeat daily, weekly, or monthly.

• Predictable: Information always has expected results (e.g., customers are billed for what they purchased in a month).

• Emphasis on the past: Information describes past activities (e.g., payroll output describes an employee’s past work pay).

• Detailed nature: output information is very detailed (e.g., paychecks have details on the worksheet of each employee’s gross and net pay).

• Structured form: input and output data format are structured (e.g., data on time cards are carefully formatted in identical fashion).

• Great accuracy: input and output data to/from TPS must be accurate and carefully checked.

Characteristics of Transaction Processing Systems (TPS)

• Repetitive: Transactions occur regularly, such as daily, weekly, or monthly.

• Predictable: Information generated always yields expected results, e.g., billing customers for monthly purchases.

• Emphasis on the Past: Information primarily reflects past activities, such as payroll outputs showing employees' past work pay.

• Detailed Nature: The output is very detailed; for instance, paychecks include specifics about each employee's gross and net pay.

• Structured Form: Input and output data adhere to structured formats, ensuring consistency (e.g., time cards formatted identically).

• Great Accuracy: Data input and output must be accurate and undergo meticulous checking.

Benefits of Automated Transaction Processing Systems

• Reduced Costs: Automation results in lower labor and personnel expenses.

• Increased Speed: Enhanced operational efficiency leads to faster processing times.

• Increased Accuracy: Reduction in typing errors and error-free data entry and processing.

• Improved Customer Service: Faster responses to customer inquiries and round-the-clock access to information.

• Enhanced Data for Decision-Making: Serves as a foundation for Decision Support Systems (DSS) by collecting and storing all transactional data effectively.

Applications of Transaction Processing Systems in Business

• Retail Environments: Supermarkets use TPS for checkouts, where every transaction is recorded immediately.

• Banking: ATMs are a classic example of TPS, facilitating quick transaction processing.

• Payroll Processing: Automated TPS can manage payroll, ensuring timely and accurate salary payments.

• Reservation Systems: Airline ticket sales online rely on TPS to process transactions in real-time, updating inventories immediately.

• Financial Transactions: Stock market exchanges utilize TPS for the immediate buying and selling of stocks, providing real-time updates.

• Hospitality and Food Service: Fast food outlets implement TPS to manage orders and customer payments efficiently.

Overall, TPS is fundamental to the efficient operation of various business sectors, streamlining transaction processes and enhancing overall organizational productivity.