1. Introduction to MIS
Chapter 6
Transactions and Enterprise Resource Planning
Jerry Post
Technology Toolbox: Selecting an ERP System
Technology Toolbox: Designing an EIS
Cases: Auto Industry

2. Outline
 How do you process the data from transactions and integrate the
operations of the organization?
 How do you efficiently collect transaction data?
 What are the major elements and risks of a transaction?
 Why are transactions more difficult in an international environment?
 How do you track and compare the financial information of a firm?
 What are the transaction elements in the human resources
management system?
 Can a company become more efficient and productive?
 How do businesses combine data from operations?
 How do you combine data across functional areas, including
production, purchasing, marketing, and accounting?
 How do you make production more efficient?
 How do you keep track of all customer interactions? Who are your
best customers?
 How can a manager handle all of the data in an ERP system?
 How does the CEO know that financial records are correct?

3. Transactions and Integration
Additional CEO Information
Stores
Strategy Bank
Tactics Warehouse
Inventory
Management
Supplier
Operations
EDI
POS Sales Reports
Cash
Registers
Customers Process Control
Central Computer

4. Data Capture
Banking and Finance
Sales
Workers
Process Control
Collecting transaction data at the point of sale ensures accurate data,
speeds transactions, and provides up-to-the-minute data to managers.

5. Radio Frequency Identification
(RFID)
Radio/microwaves RFID tag
Simple security tag
Capacitor:
collected energy
C
B
E
antenna Transistors:
RFID reader data
Data:
Alter the waves
Scanner from: http://www.rfidinc.com

6. QR Codes
Two-dimensional code.
Can hold thousands of
characters or digits.
Can be read by cell phone
cameras.
Initially used for packages.
Now, often used for marketing,
even billboards, museum and
art pieces, and bus schedules.
http://qrcode.kaywa.com/
One of several Web sites to create free QR codes.

7. Process Control
Various Production machines: lathe, press, dryer, . ..
Production data:
Quantity
Quality
Time Control Terminal
Machine status Control settings
and commands

8. Electronic Data Interchange
 The price of paper
◦ $30 to $40 for each purchase order
◦ $24 to $28 for suppliers to handle
 EDI
◦ $12 for orders
◦ 0.32 for suppliers
 Proprietary EDI
 Commercial providers and standards

9. EDI: Proprietary
Firms must support multiple data
formats and sometimes different Order
computers for each contact. Database
& Accounts
Supplier
Queries &
Orders
Customer 1
Production Convert Invoices &
Database confirmation
& Accounts
Convert
Customer 2

10. EDI Standards
 UN Edifact
 US ANSI X12 Message
 Segments for each area Segment
Composite Data Element
 Detail data formats Data Element
Code Lists

11. ANSI X12 Segments
104 - Air Shipment Information
Partial List of segments
110 - Air Freight Details and Invoice Detailed specifications
125 - Multilevel Railcar Load Details
126 - Vehicle Application Advice
for each segment
127 - Vehicle Buying Order Data needed
128 - Dealer Information
129 - Vehicle Carrier Rate Update
Format
130 - Student Educational Record (Transcript)
131 - Student Educational Record (Transcript) Acknowledgment
135 - Student Loan Application
139 - Student Loan Guarantee Result
140 - Product Registration
141 - Product Service Claim Response
142 - Product Service Claim
143 - Product Service Notification
144 - Student Loan Transfer and Status Verification
146 - Request for Student Educational Record (Transcript)
147 - Response to Request for Student Ed. Record (Transcript)
148 - Report of Injury or Illness

12. EDI On The Internet
 Advantages
◦ Low cost.
◦ Anyone can connect.
◦ Worldwide reach.
◦ Many tools and standards.
The Internet
Edifact Message

13. Extensible Markup Language (XML)
<?xml version="1.0"?>
<!DOCTYPE OrderList SYSTEM "orderlist.dtd">
<OrderList>
<Order>
<OrderID>1</OrderID>
<OrderDate>3/6/2004</OrderDate>
<ShippingCost>$33.54</ShippingCost>
Example <Comment>Need immediately.</Comment>
<Items>
<ItemID>30</ItemID>
<Description>Flea Collar-Dog-Medium</Description>
<Quantity>208</Quantity>
<Cost>$4.42</Cost>
<ItemID>27</ItemID>
<Description>Aquarium Filter &amp; Pump</Description>
<Quantity>8</Quantity> Data is sent in a
<Cost>$24.65</Cost> standard format that
</Items> is easy for computers
</Order> to parse and read.
</OrderList>

14. XML: eXtensible Markup Language
 Used as a standard means
to transfer data to
machines with unknown
capabilities.
 Most hardware and
software can read and
understand the data.
 The tags describe the
content.
 Usually a separate schema
file is used to describe the
tags and the document
structure.

15. Extensible Business Reporting
Language: XBRL
http://media.ifrs.org/ixbrl_example1_2011-03-25.xhtml

16. XBRL Sample tag: Revenue
<ix:nonFraction Attributes
contextRef="y2012“
format="ixt:numcommadot"
name="ifrs:Revenue"
unitRef="EUR" decimals="0" scale="0"
id="XWAND00000326">6,863,545
</ix:nonFraction>
Data
The Securities and Exchange Commission is requiring
XBRL filings as of June 2011. The goal is to
standardize reporting data and make it accessible to
automated systems.

17. Transaction Risks
Credit card Vendor
company
accepts risks 1. Receive payment.
for a fee.
2. Legitimate payment.
3. Customer not
repudiate sale.
4. Government not
invalidate sale.
Government
1. Transaction record.
Customer
2. Tax records.
1. Receive product.
3. Identify fraud.
2. Charged only as agreed.
4. Track money for other
3. Seller not repudiate sale. cases (drugs).
4. Legal transaction.

18. Security and Trust
 Security  Trust
◦ Each transmission is ◦ Is the vendor legitimate?
encrypted.  Consider: Internet gambling.
 Prevent interception.  What if offshore vendor
 Keys generated by refuses to pay off a bet?
certificate authority (e.g.,  As long as Internet gambling
Verisign). is illegal (in the U.S.)
◦ Security on individual consumer has no recourse.
servers is the responsibility  Otherwise, use credit cards
of vendor. and rely on banks.
 There have been some  Secure certificates.
thefts of data (e.g., credit- ◦ Is the customer legitimate?
card numbers.)  Rely on credit card data.
 Vendor is motivated to  Some vendors will ship only
secure the server. to billing address.
 Commercial software exists  Certificate authority.
to provide secure sites.

19. International Transaction Issues
Shipping
Currencies
Languages
Customs and tariffs
Jurisdiction for disputes
Different laws and
systems
Verify seller and
purchaser
Payment methods
http://worldwind.arc.nasa.gov

20. Accounting
 Financial data and reports
 What do things really cost?
 The accounting cycle
 Inventory
 Checks and balances
◦ Double-entry
◦ Separation of duties
◦ Audit trails

21. Accounting
Banks Management
and
Creditors Shareholders
Loans & Notes Planning Reports
Cash Management
Management, Reports Shareholder
Strategic
Investments, Reports
& Tactical
Foreign Planning
Exchange Capital Acct
Produce Governments
Departments
Planning Shareholder
& Employees
Data Reports
Payroll & Produce Tax Filings
Equity
Expenses Employee Management
Benefits Tax data Tax
Payroll Accounting
Filing &
Reports
Planning
Receivables
Inventory & Sales Tax
Orders & Assets
Sales &
Accounts Payables Inventory
Accounts
Payable Management, Sales & Receivables
Receivable
& Fixed Asset
& Cost Acct. Customers
Purchases &
Payables Inventory Changes Inventory Changes
Supply & Product
Suppliers In-process Inventory
Inventory

22. Accounting Software
 General Ledger  Accounts payable
◦ Sample chart of accounts ◦ Check reconciliation
◦ Automatic posting ◦ Automatic recurring entries
◦ Automatic entry of vendors ◦ Monitor payment discounts
◦ Fiscal years ◦ Select bills from screen
◦ Keep past data books open ◦ Pay by item, not just total bill
◦ Post to prior years  General Features
◦ Allocate department expenses ◦ Printer support
 Accounts Receivable ◦ Use of preprinted forms
◦ Automatic early discounts ◦ Custom reports
◦ Interest on late payments ◦ Custom queries
◦ Multiple shipping addresses ◦ Security controls
◦ Sales tax ◦ Technical support costs
◦ Automatic reminder notices
◦ Automatic monthly fees
◦ Keep monthly details

23. The Role of Accounting
 Transaction Data
◦ Journal entries—double entry: money and
categories
◦ General ledger—summary data by categories
◦ Information is defined by the chart of accounts
 Purchases, Sales, Loans, and Investments
 Inventory Control
 Process and Controls
◦ Double-Entry Systems
◦ Separation of Duties
◦ Audit Trails
◦ Exception reports

24. Human Resources Management
Management
Compile
Merit Management
Managers
Evaluations Reports
& Salary Merit
Changes Produce
Evaluations
Management
Government
Employee
Produce
Reports
Merit & Government
Salary Reports
Government
Salary Employee
Reports
Summaries
EEO
Process Data
Employee
Payroll Employee Data
Data
Benefits Files
Screen
Vacation
Jobs &
Job & Applications
Employee Applicant
Applicant
Data Data
Sales Data & Data
Commission
Employees
Job
Customers Applicants

25. Production Management
Suppliers
Receiving
Bill of Materials
Crank UL6500
Quality Pedals LK3500
Purchase
Stem UL6600
Orders Saddle Selle
Production …
and Assembly
Quality
Production
Information Customers
System Quality
Shipping
Customer Order

26. Production Management Issues
factories
Multiple factories produce many
items that need to be distributed to
multiple stores.
Ask Gitano Jeans
in the 1980s
How do you schedule Customers
efficient production? or stores
How do you ensure the
right products go to the
right locations?

27. Distribution Center
Factories
Split the mass production shipments into
smaller units and distribute to stores
immediately—without holding inventory. Customer
or stores
Need to match orders exactly, and carefully
schedule arrival time of shipments.

28. Integrated Report Example
Production
Plant Quantity Quality Costs Prior Month
Boise 260,721 9.6 $41,222,697 219,961
Decatur 171,371 8.75 $31,094,809 188,862
Yaounde 314,856 9.4 $29,119,967 406,859
746,948 9.25 $101,437,473 815,682
Wtd. Avg. 135.80
Sales
Region Quantity Avg.Price Sales Prior Sales Wtd. Cost Net
US East 225,091 $289.17 $65,965,373 $53,533,640 30,567,941 $35,397,432
US West 204,725 $273.20 $56,217,470 $42,018,759 27,802,185 $28,415,285
Canada 65,763 $192.00 $12,561,225 $12,327,456 8,930,786 $3,630,439
South America 67,495 $133.50 $9,013,737 $11,281,515 9,165,996 ($152,259)
Other 47,313 $169.00 $7,991,533 Sales $8,120,900 6,425,228 $1,566,305
610,387 $211.37 $151,749,338 $127,282,270 82,892,136 $68,857,202
$70,000,000 $40,000,000
$60,000,000 $35,000,000
$30,000,000
$50,000,000
$25,000,000
$40,000,000 Sales
$20,000,000 Prior Sales
$30,000,000
$15,000,000 Net
$20,000,000
$10,000,000
$10,000,000 $5,000,000
$0 $0
US East US West Canada South America Other

29. Changes
Sales 1970s
Terminals
Management
Central 3 reports
sales (printed) Manager: weekly reports
data computer: Integrate, graph
Sales create reports analyze
Terminals Secretary:
type & revise
Sales 1980s
Management
Terminals
Central 3 reports
sales (printed) Manager: weekly reports
data computer: Integrate, graph
Sales create reports analyze
Terminals
personal computer
Sales 1990s Management
Terminals query
Personal Computer
sales DBMS: Weekly reports &
data
Sales On-line data ad hoc queries
Terminals data (applications)

30. Integration in 2000s
Management
Sales
Terminals query Executive Information
sales System
data DBMS Personal Computer
Sales Or PDA
Terminals data Or Browser
Suppliers
Production/ Enterprise Resource
Service
Planning
Banks

31. ERP Integration
Headquarters
(England)
Subsidiary
(Spain)
Database
Use inventory item. Database
Financial data Deduct quantity. Manufacturing
General ledger Update inventory value. Product details
Payroll Check for reorder point. Inventory
… Order new item through EDI. …
Update Accounts payable.
Weekly financial status. Project cost report.
Cash flow. Daily production report.
Budget versus actual cost.

32. ERP Primary Functions
 Accounting
◦ All transaction data and all financial statements in any
currency
 Finance
◦ Portfolio management and financial projections
 Human Resources Management
◦ Employee tracking from application to release
 Production Management
◦ Product design and manufacturing lifecycle
 Logistics/Supply Chain Management
◦ Purchasing, quality control, tracking
 Customer Relationship Management
◦ Contacts, orders, shipments

33. Enterprise Resource Planning
 Integrated systems  International environment
 Examples ◦ Multiple currencies
◦ Multiple languages
◦ SAP
◦ Procedures and practices
◦ PeopleSoft ◦ Follows local (national) rules
◦ Oracle Financials ◦ Follows consolidation rules
 Basic features included ◦ Example
◦ Accounting  U.S. firm with European
subsidiaries.
◦ Purchasing  Data is entered once
◦ HRM  European reports are
generated for subsidiaries
◦ Investment management following local rules
 Results are converted and
consolidated to U.S. firm
following international and
U.S. rules

34. SAP
 Based in Germany, now  Financials
worldwide  Logistics
 Support for international  Human resource
transactions and management
multinational firms
 Runs on multiple database
and hardware platforms
 Can handle large and small
companies
 Expensive, but price is
relative.

35. SAP Financials
 Financial Accounting  Treasury
◦ General ledger ◦ Cash management
◦ Accounts receivable/payable ◦ Treasury management
◦ Special ledgers ◦ Market risk management
◦ Fixed assets ◦ Funds management
◦ Legal consolidation  Enterprise Control
 Investment Management ◦ Executive information system
◦ Investment ◦ Business planning and
planning/budgeting/control budgeting
◦ Depreciation ◦ Profit center accounting
forecast/simulation/calculate ◦ Consolidation
 Controls
◦ Overhead cost
◦ Activity based costing
◦ Product cost
◦ Profitability analysis

36. SAP Logistics
 Purchasing  Product data management
 Materials management ◦ Master data management
 Manufacturing ◦ Design and change process
 Warehousing ◦ Product structure
◦ Development projects
 Quality management
 Plant maintenance  Sales and distribution
◦ Sales activities
 Service management
◦ Sales order management
 Sales
◦ Shipping and transportation
 Distribution
◦ Billing
◦ Sales information system

37. SAP Logistics
 Production planning and  Project system
control ◦ Work breakdown structures
◦ Production planning ◦ Network planning
◦ Material requirements techniques, milestones
planning ◦ Cost, revenue, financial,
◦ Production control and schedule, and resource
capacity planning management
◦ Costing ◦ Earned value calculation
◦ Order information system ◦ Project information system
◦ Shop floor information
system

38. SAP Logistics
 Materials management  Plant maintenance
◦ Purchasing ◦ Structuring technical systems
◦ Inventory management ◦ Maintenance resource
◦ Warehouse management planning
◦ Invoice verification ◦ Maintenance planning
◦ Inventory controlling ◦ System for technical and cost
accounting data
◦ Purchasing information
system ◦ Maintenance information
system
 Quality management
◦ Quality planning
◦ Quality inspections
◦ Quality control
◦ Quality notifications and
certificates
◦ Quality management
information system

39. SAP Logistics
 Service management  Integration
◦ Customer installed base ◦ When the clerk enters a
administration sale, bills are generated
◦ Service contract automatically (mail, fax, or
management EDI).
◦ Call management ◦ Sales and revenue are
instantly updated in
◦ Billing
financial and control
◦ Service information system modules.
◦ The sales information
system and EIS provide
various up-to-date views
and reports.

40. SAP HRM
 Personnel management  Payroll accounting
◦ HR master data ◦ Gross/net accounting
◦ Personnel administration ◦ History function
◦ Information systems ◦ Dialog capability
◦ Recruitment
◦ Multi-currency capability
◦ Travel management
◦ International solutions
◦ Benefits administration
◦ Salary administration  Time management
 Organizational ◦ Shift planning
management ◦ Work schedules
◦ Organization structure ◦ Time recording
◦ Staffing schedules ◦ Absence determination
◦ Job descriptions ◦ Error handling
◦ Planning scenarios
◦ Personnel cost planning

41. SAP HRM
 Personnel development  Other features
◦ Career and succession ◦ SAP Business workflow
planning ◦ Internet scenarios
◦ Profile comparisons ◦ Employee self-service
◦ Qualifications assessments
◦ Additional training
determination
◦ Training and event
management

42. SAP Integration
 Financial general ledger  Simple example
holds all base totals. ◦ Manufacturing uses an item
 Sub-ledgers are defined for from inventory
important accounts ◦ The quantity on hand is
◦ Accounts payable updated
◦ Manufacturing ◦ The inventory value is
automatically changed
◦ User-defined
 On any sub-ledgers
◦ etc.  On the general ledger
 All transactions ◦ Reports are generated in
automatically flow through any currency
◦ Including currency ◦ New orders and payments
conversions can be generated through
◦ Special rules can be EFT.
defined

43. Supply Chain Management
Design feasibility Design &
Engineering Designs and Quality
& production costs
Marketing
product planning Quality control
& Custom orders
planning
& monitoring Manufacturing planning
Vendors & monitoring Customers
Purchasing Demand-pull Mass Distribution
Customization Quick
Just-in-Time Response
partnerships partnerships
Administration & Management
& joint & joint
development HRM Accounting Finance MIS development

44. Purchasing/Logistics
Buyer
Suppliers
Identify product features
Provide product details
Request for Proposal
Evaluate suppliers
Negotiate contract Negotiate contracts
Identify exact items and costs
Verify orders and times
Correct errors Correct errors
Schedule delivery
Receive products Monitor shipments
Match receipts against order
Return items Handle returns
Pay supplier Monitor payments

45. Supply Chain: Purchasing

46. The Role of XML
Buyer
Supplier
Messages
and data
<xml>
ERP: Oracle <order> ERP: SAP
…
</order>
</xml>

47. Customer Relationship
Management
 Multiple Contact Points
◦ The goal is to provide a single, integrated
view of all customer activity, available to
all employees who interact with the
customer.
 Feedback, Individual Needs, and
Cross Selling
◦ Having better information enables
workers to provide better service, meet
the individual needs of each customer.

48. CRM: Sales Management

49. PeopleSoft CRM: Customer Perspective

50. ERP: Summarizing Data
 An ERP database can be gigantic.
 It would take time to evaluate every
single transaction.
 Managers, particularly executives,
need to begin with a summary of
some basic conditions.
◦ The summary is usually graphical.
◦ Managers can then drill down and look at
the detail.

51. Digital Dashboard Example
Charts
Gauges
Icons
Tickers
Exceptions
Drill-down links
http://www.corda.com/exa
mples/go/ddash/front.cfm

52. Digital Dashboard Examples
http://www.dundas.com/dashboard/start/samples/?Campaign=Goog
leDashboardExamples&gclid=CKme4q6du6cCFQE2gwodCAz8Bg
Active, Silverlight examples from Dundas

53. Executive IS: Drill-Down
Sales
Production Costs Production Costs
Distribution Costs South
Executives
Fixed Costs North
Overseas
5000
4500
4000
3500
3000 South
2500 North
2000
Overseas
1500
1000
Central Management 500
0
1993 1994 1995 1996
Production: North
Data Item# 1995 1994
Data 1234 542.1 442.3
2938 631.3 153.5
Sales Data 7319 753.1 623.8
Production
Distribution Data

54. Audits and Sarbanes-Oxley
Financial
Statements
Cash
Inventory
Sales
Inventory
Some financial numbers
are tied to the outside
world.
Validate these to anchor
the statements.
Bank Customer

55. Cloud Computing and ERP
 Several companies provide online services
◦ NetSuite.com
◦ Lawson, Oracle, and SAP provide some hosting options
◦ Many others
 Few companies use accounting systems in the cloud.
◦ Security, privacy, and reliability concerns
◦ Customization is needed in both cases and it can be
expensive
◦ Variable costs can be expensive over time
◦ Browser-based approach is relatively new and mobile
networking has been expensive and slow
 CRM is popular online
◦ Largely Salesforce.com
◦ But if it is not integrated with the ERP it is largely contact
management.

56. Technology Toolbox: Selecting an ERP
System
Planning Stage Goals and Outputs
Initiation Estimate costs, establish objectives, select team
Initial Planning Initial vendor list and basic features (hardware
platform, fees, internationalization, vendor size
and stability, industry-specific support and so on.)
Requirements Identify business requirements. Detailed list of
Gathering specifications, unit goals, and critical features.
Evaluation criteria.
Demos and Product demonstrations, ratings, and site visits.
Selection
Implementation Customize applications, convert data, restructure
company operations, define new processes and
train employees.

57. Quick Quiz: Selecting an ERP
System
1. Assume you work for a mid-size construction firm that does
about 30 percent of its work internationally. Find at least
three ERP vendors and outline the features they provide.
2. Assume you work for a large retail clothing firm with stores in
most U.S. states. Identify the specific accounting and
financial features you would want in an ERP system.
3. Assume you work for a regional manufacturer that makes
parts for cars. Explain how you would select and evaluate an
ERP system. Find an example of a system that would work.

58. Technology Toolbox: Designing an
EIS
http://www.visualmining.com

59. Quick Quiz: Designing an EIS
1. Assume you have been hired to help a regional law firm. What
key elements might go on the main EIS screen?
2. Assume you have bee hired to help an airplane manufacturer,
design the main EIS screen.
3. To help design an EIS for a retail video store chain, briefly
describe the screens and steps needed to identify stores that
are performing below par and find possible causes of the
problems.

60. Cases: Autos
Annual Revenue
350
300
250
General Motors
Billion $
200
Ford
150
DaimlerChrysler
100 Toyota
50
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Net Income / Revenue
0.20
0.15
0.10
0.05
General Motors
0.00
Ratio
Ford
-0.05 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
DaimlerChrysler
-0.10
Toyota
-0.15
-0.20
-0.25
-0.30