CHAPTER 2

TYPES OF BUSINESS INFORMATION SYSTEM

INTRODUCTION

Information System support business operations by processing data related to business operation activities & providing information to assist management.

Computer information system increases the efficiencies of business operations.

TRANSACTION PROCESSING SYSTEM (TPS)

A type of information system that collects, store, modify & retrieve the transactions of an organization.

TPS features : Rapid response

Fast performance with a rapid response time is critical. Reliability

Organizations depends heavily on TPS, failure rate must be low.

Inflexibility Every transaction to be processed in the same way

regardless the user. Controlled processing

Processing in TPS must support an organization’ s operation.

TRANSACTION PROCESSING SYSTEM (TPS)

TPS general purpose; To keep record about the state of the organization To process transaction that affect these records. To produce output that reports on transaction that have

occurred, state of the organization & cause other transaction to occur.

TPS structure; Users – people who deal with business transaction.

(sales etc) Input – data about transactions Output – printed reports TPS stored data – consists of files & databases with

data about the state or the organization. TPS software – application software that accepts the

input data about the transaction, processes it, make changes & produces output.

TPS functions; Input function

Accepts data from outside the system, data must be captured from its source before being entered in TPS (data entry process)

Processing function Manipulating data within the system. Computing & decision

making is sample of processing function. Output function

Usually in the form of printed or display on screen. There are few types of reports such as detail report, summary report & exception report.

Storage function Data is stored in data files & databases. 2 types of stored

data; Master data – main data used by the system & permanent. Transaction data – about transactions occurred &

temporary.

CONTROLLING TPS

Procedures to ensure completeness of the data processing & to minimize the chance of errors is called CONTROLS.

There are few types of controls: Control total – a number that is computed when

data enters a system & then computed again after the system process the data.

Audit trails – way of tracing the effect of data through a system. A good audit trail should allow one to start at output through the source.

Backup & recovery procedures

PROCESSING DATA IN TPS

Data can be processed using 2 basic approaches; Batch processing

Data for all transactions to be processed is prepared in a form understandable to the computer before actual processing begins. Then the batch of data is processed by the computer & resulting output is received in a batch.

On-line processing A person uses input & output devices connected to

computer at the time processing is done. Each set of data is entered directly into the computer, processed & output received before keying in the next input data.

TYPES OF TPS

8 basic information processing activities; Entering customer orders Billing customers Collecting customer payments Keeping track of inventory Purchasing stock & materials Paying bills Paying employees Reporting financial information

TYPES OF TPS

Order Entry System Accept customer orders for goods / services

& to prepare the orders in the form that can be used by the business.

Input :Accept

customer order

Processing:Validate order data

Check stockCheck credit

Output:Product sales

order

Storage:Store order data

Access stock master dataAccess customer order

data

TYPES OF TPS

Types of Billing System To prepare the customers bill or invoice Ex; sales order is the input to billing system, &

invoice is the output.

Accounts Receivable System Purpose is to keep track of money owned to the

business by its customers & to record customer payments for invoice.

Ex; invoice data & customer payments are the input for accounts receivable system, statements are sample output.

TYPES OF TPS

Inventory Control System To keep track of business inventory, to indicate

when inventory should be re-ordered & to compute the value of inventory.

Ex; sales order data, notice on receiving item data are sample input & output will be inventory re-order report.

Purchasing System To determine the best suppliers from which to

purchase items & to prepare purchase orders, which indicate the suppliers what are the items needed.

Ex: input (data from the inventory re-order report) & output (purchase order)

TYPES OF TPS

Accounts Payable System To keep track of money owned by the business for

the purchases, to pay suppliers for items purchased & provide reports of accounts payable to other function of the business.

Ex: input (purchase data on what has been ordered, invoice from supplier) & output ( supplier payment)

Payroll System To prepare paychecks for employees & to provide

reports of payroll. Ex : input (employee work report data), output

(produce paycheck)

TYPES OF TPS

General Ledger System To maintain the business’s financial accounts

& to prepare financial statements. Ex : input(data on revenue, expenses, assets)

& output (financial statement)

OTHER BUSINESS INFORMATION SYSTEM

Accounting Information System Supports the accounting function, consists of

3 types; Fixed asset accounting – to account for

business asset such as building, land & equipment.

Budgeting – prepares projections of revenues & expenses & compares actual figures with the projected ones.

Tax Accounting – to prepare business tax reports & to pay taxes.

OTHER BUSINESS INFORMATION SYSTEM

Financial Information System Responsible for obtaining money needed by the

business & for planning the use of that money. Cash management – balances the need for cash &

expected cash availability. Capital expenditure analysis – to analyze the effect

on business of large expenditure such as major repair, new building etc

Financial forecasting – forecast financial information such as revenue & expenses for future.

Portfolio management – analyzes alternative investment strategies for the business’s cash & keep track of the investments.

Credit analysis – to determine which customer should receive credit.

OTHER BUSINESS INFORMATION SYSTEM

Marketing Information System Responsible for selling goods & services for the

business. Order entry is considered to be a marketing information system. Sales analysis – determines which products are selling

well & poorly. Sales forecasting – to project sales in the future. Marketing research – analyzes information about

product & consumers to identify the trends. Direct mail advertising – prepares advertising pieces

for mailing directly to potential customers. Electronic commerce – uses internet to advertise &

sell goods. Sales force automation – provide information to assist

staffs to perform their task.

OTHER BUSINESS INFORMATION SYSTEM

Manufacturing Information System Concerned with the production of goods that the

business sells. Production scheduling – schedules the use of

manufacturing facilities to produce products efficiently.

Materials requirements planning (MRP)- determining what parts/ materials will be needed & when will it be needed.

Just-in-time inventory management – a form of inventory control on which parts & materials are scheduled to arrive from supplier before they are needed.

Computer aided design (CAD) – using computer to assist in the design of the product.

Computer aided manufacturing (CAM) – using computers to control machines in the manufacturing process.

Robotics – uses computer controlled robots Computer integrated manufacturing –

combines many of the other manufacturing systems into a single system.

OTHER BUSINESS INFORMATION SYSTEM

Human Resource Information System Responsible for hiring, training,

compensating & terminating employees. Performance appraisal – analyzes employee’s

performance on the job Skills inventory – keeps track of employee’s

skills & matches with specific job Benefits administration – manages

employee’s benefit packages Job applicant tracking – keeps track of

applicants for job.

ORGANIZING INFORMATION SYSTEM FUNCTIONS

Main features of 4 ways of organizing the functions of information system.

Centralized systems Teleprocessing systems Decentralized systems Distributing systems

CENTRALIZED SYSTEM

Means that all input, output, processing & storage functions are performed at a single / central location.

Advantages Economical - in terms of hardware usage Better control – due to one location

Disadvantages Lack of response to the user – output take long

time to be returned to user. Not user friendly – users have to deal with

central staffs for any outputs which is frustrating.

TELEPROCESSING SYSTEM

Transmits input & output data electronically between user’s location & the central location.

Processing & storage functions are still centralized, while input& output are from different locations.

Advantages Quicker input/output response to the user

Disadvantages User still need to deal with central staffs to

request new/modifies system.

DECENTRALIZED SYSTEM

To overcome the lack of response to user’s needs for new & modified system.

Advantages Better response to the user’s needs – because each

group of users has a computer for its system. Disadvantages

Hardware cost – several smaller computers usually cost more than one large computer that can perform all processing.

Lack of control – each group responsible for controlling the use of their computer & failing to follow procedures may result in system not performing as desired. Data may not be transferable to another.

DISTRIBUTED SYSTEM Similar to decentralized system in terms of location,

hardware & control but allows for communication between one system to another since they are linked using data communications to form LAN/WAN

Computers do not have to do the processing tasks as it can be send to another computer where the processing can be done & output sent back.

Advantages Provide better response to users with added capabilities. More control – users must follow a standard procedure

Disadvantages Complexity – many computers, & massive network, a lot

of procedures & users need training.