Introduction to MIS - Chapter 5: Operations and Transactions

Introduction to MISChapter 5Operations and TransactionsCentral ComputerSales ReportsPOSTerminals/RegistersCustomersEDISupplierBankAdditionalStoresProcess ControlTransactionsOutlineData CaptureElectronic and Mobile CommercePayment MechanismsData QualityTransactionsThe Role of AccountingHRM and Transaction ProcessingCases: Retail SalesAppendix: AccountingBusiness OperationsTacticalManagementStrategicMgt.EISESDSSTransactionProcessingProcess ControlData CapturePoint of SaleProcess ControlElectronic Data InterchangeCentral ComputerSales ReportsPOSCashRegistersCustomersEDISupplierBankProcess ControlAdditionalStoresStrategyTacticsOperationsWarehouse InventoryManagementCEO InformationData Capture: SalesCollecting transaction data at the point of sale ensures accurate data, speeds transactions, and provides up-to-the-minute data to managers. Process ControlVarious Production machines: lathe, press, dryer, . ..Control TerminalProduction data: Quantity Quality Time Machine statusControl settingsand commandsElectronic Data InterchangeThe price of paper$30 to $40 for each purchase order$24 to $28 for suppliers to handleEDI$12 for orders0.32 for suppliersProprietary EDICommercial providers and standardsEDI: ProprietarySupplierCustomer 1Queries &OrdersInvoices &confirmationProductionDatabase& AccountsOrderDatabase& AccountsConvert dataConvert dataDifferent formatCustomer 2Firms must support multiple data formats and sometimes different computers for each contact.EDI: StandardsSupplierCustomer 1ProductionDatabase& AccountsOrderDatabase& AccountsCustomer 2Bank/EDI consolidatorConvert toStandardRouteMessagesMessagesto/fromany customerConvert toStandardConvert toStandardEDI StandardsMessageSegmentComposite Data ElementData ElementCode ListsUN EdifactUS ANSI X12Segments for each areaDetail data formatsANSI X12 SegmentsPartial List of segmentsDetailed specifications for each segmentData neededFormat104 - Air Shipment Information 110 - Air Freight Details and Invoice 125 - Multilevel Railcar Load Details 126 - Vehicle Application Advice 127 - Vehicle Buying Order 128 - Dealer Information 129 - Vehicle Carrier Rate Update 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 EDI On The InternetThe InternetAdvantagesLow cost.Anyone can connect.Worldwide reach.Many tools and standards.Designed to be robust, minimizes impact of network failures.DrawbacksNo service guarantee.Delays might be unacceptable.Questionable reliability.Security is challenging.Date & TimeValueItemBuyerSellerItem_IdDescriptionLocation. . .TransactionsItemsBuyer_IdAddressPhoneSeller_IdAddressPhoneBuyersSellersTransaction ObjectsExample AttributesDate & timePriceQuantityItem NumberBuyerSellerExample MethodsStorePrintVerifyTransaction Riskspaymentproducts or servicesVendorCustomerGovernment1. Receive payment.2. Legitimate payment.3. Customer not repudiate sale.4. Government not invalidate sale.1. Receive product.2. Charged only as agreed.3. Legal transaction.1. Transaction record.2. Tax records.3. Identify fraud.4. Track money for other cases (drugs).Credit card company accepts risks for a fee.E-Commerce Risk Mitigationproducts or servicesVendorCustomerEncrypt(credit card data)Verify vendor identity.Encrypt(Database)Consumer is protected by credit card company.Vendor is not protected by credit card and has only weak methods to verify customer identity.Encryption protects transmission of data and verifies identity of vendor.It is critical that vendors protect their databases.Shopping on the InternetAdvantagesSearch and compare.More tailored information.Wider selection.More competition.Speed: especially if you can download the product.Comparison databases: What did others buy?DrawbacksAvailability: requires a computer and an ISP.Slow speed limits graphics and video.Limited portability.Trust: vendors and consumers.Taxation.Electronic CommercePre-PurchaseStatic data sites.Promotion.Product specifications.Pictures.Schematics.Pricing.FAQs.Interactive sites.Configuration.Compatibility.Complex pricing.Purchase (requires interactive).Transmission security.User identification.Product selection.Payment validation.Order confirmation.Electronic CommercePost-PurchaseService.Revenue generation.Problem tracking.Sales leads.Resolve problems.Answer questions.Product evaluation.Modifications.Tracking customers.Digital content.Software.News and data.Books.Music.Video.Copyrights and piracy.World intellectual property rights organization (WIPO)U.S. 1998 law making it a crime to circumvent protection schemes.Open distribution and publishing--reduces control of existing publishers. E-Commerce and TaxesGovernor’s association.Led by Leavitt from Utah.Currently over 30,000 tax districts (state/county/local).Could simplify to 50.Currently, unfair advantage to out-of-state firms.Japan and United States.1998 agreement to no taxes on Internet sales.Goal of increased international trade.U.S. Constitution.Forbids taxation of interstate commerce.States currently ask residents to pay a “use” tax on purchases made out-of-state.Supreme court ruled that states cannot require out-of-state vendors to collect tax.If a firm has a “presence” in the state, it must collect the tax.Security and TrustSecurityEach transmission is encrypted.Prevent interception.Keys generated by certificate authority (e.g., Verisign).Security on individual servers is the responsibility of vendor.There have been some thefts of data (e.g., credit-card numbers.)Vendor is motivated to secure the server.Commercial software exists to provide secure sites.TrustIs the vendor legitimate?Consider: Internet gambling.What if offshore vendor refuses to pay off a bet?As long as Internet gambling is illegal (in the U.S.) consumer has no recourse.Otherwise, use credit cards and rely on banks.Secure certificates.Is the customer legitimate?Rely on credit card data.Some vendors will ship only to billing address.Certificate authority.Internet International IssuesJurisdiction questions for disputes.Collection and payment for sales. Currently rely on credit cards.Many people do not use credit cards.Does not protect vendor.Coordinate and stop fraud.Control harassment, spamming, and denial of service attacks.Encryption restrictions.U.S. classifies as munitions.France does not allow citizens to use encryption at all.Different privacy rules.Nations have differing perspectives of “offensive” content.B2B Auction MarketsBuyers and sellers connected through a Web site.Payment MechanismsCredit card drawbacksHigh transaction costs.Not feasible for small payments.Do not protect the merchant.Characteristics neededLow enough costs to support payments less than $1.Secure transmission.Secure storage.Authentication mechanism.Easy translation to traditional money.AlternativesMobile phone bill.Smart cards.Digital Cash PaymentConsumerVendorTrusted PartyConversion toreal money.Bank(A) Consumer purchases a cash value that can be used only once.(B) Customer choose product, sends ID or digital cash number.(C) Cash amount is verified and added to vendor account.Data QualityIntegrityErrors in data entry.Missing data.Failure to make updates.Multitasking/ConcurrencyChanges by two people at same time gives bad data.VolumeCostErrors harder to spot.Transmission costs.Difficulty of searching.System overload.SummariesToo much detail.Hard to get detail.TimeReport and decision deadlines.Departments get data at different times.Sequencing problems.Concurrency and Data IntegrityCustomer AccountsSanchez 500Transaction ATransaction B1) receive 300 payment2) read balance (500)5) subtract payment6) store new result (200)Sanchez 2003) new purchase (350)4) read balance (500)7) add purchase8) store new result (850)Sanchez 850Multitasking and ConcurrencyData IntegrityMultitasking & concurrencyData volumeData summariesTimeAccountingFinancial data and reportsWhat do things really cost?The accounting cycleInventoryChecks and balancesDouble-entrySeparation of dutiesAudit trailsAccounting SoftwareGeneral LedgerSample chart of accountsAutomatic postingAutomatic entry of vendorsFiscal yearsKeep past data books openPost to prior yearsAllocate department expensesAccounts ReceivableAutomatic early discountsInterest on late paymentsMultiple shipping addressesSales taxAutomatic reminder noticesAutomatic monthly feesKeep monthly detailsAccounts payableCheck reconciliationAutomatic recurring entriesMonitor payment discountsSelect bills from screenPay by item, not just total billGeneral FeaturesPrinter supportUse of preprinted formsCustom reportsCustom queriesSecurity controlsTechnical support costsAccountingSuppliersCustomersManagementShareholdersBanksandCreditorsDepartments& EmployeesSales &AccountsReceivableProduceManagementAccountingReportsProduceShareholderReportsSales & ReceivablesInventory ChangesPurchases &PayablesLoans & NotesExpensesEquityShareholderReportsManagementReportsProductInventoryOrders &Accounts PayableInventoryManagement,& Fixed Asset& Cost Acct.Payroll &EmployeeBenefitsCashManagement,Investments,ForeignExchangeSupply &In-processInventoryGovernmentsTaxFiling &PlanningStrategic& TacticalPlanningInventory ChangesPayablesCapital AcctSales TaxTax FilingsTax dataReceivablesInventory &AssetsPayrollPlanning ReportsPlanningDataThe Role of AccountingTransaction DataPurchases, Sales, Loans, and InvestmentsInventory ControlProcess and ControlsDouble-Entry SystemsSeparation of DutiesAudit TrailsHRMManagementManagersEmployeesCustomersGovernmentProcessPayrollBenefitsVacationCompileMeritEvaluations& SalaryChangesJobApplicantsProduceManagementEmployeeReportsScreenJobs &ApplicationsProduceGovernmentReportsEmployee Data FilesEmployeeDataEvaluationsSalaryMerit &SalarySales Data &CommissionEmployeeDataMeritApplicant DataEmployeeSummariesJob &ApplicantDataEEO DataGovernmentReportsManagement ReportsCases: Retail SalesCases: Home Depot Toys R UsWalgreensWhat is the company’s current status?What is the Internet strategy?How does the company use information technology?What are the prospects for the industry?www.homedepot.comwww.toysrus.comwww.walgreens.comAppendix: Balance SheetAssetsCurrent AssetsPlant and EquipmentLiabilities and Owner’s EquityCurrent liabilitiesLong-term liabilitiesOwner’s equityTotal liabilities and owner’s equityAlbertson’s, 2000Numbers in thousands.Appendix: EarningsSalesCost of merch. soldGross profitOperating and admin. exp.Operating profitInterest incomeInterest expenseEarnings before taxesFederal and state taxesNet earningsSharesEarnings per shareAppendix: Cash FlowNet earningsCash flow from operations Depreciation and amortization (Gain) or loss on asset sales(Increase) decrease in current assets Receivables InventoriesIncrease (decrease) in cur. liabilities Accounts payable Accrued payroll and benefits Income taxes payableChange from investing Property, plant, equipment Proceeds from sales of assets Cash used in investingChange from financing Proceeds from long-term borrowing Payments of long-term borrowingStock changesCash dividendsAppendix: EquityBeginning balanceNet earnings/retained earningsNew stockDividendsStock repurchaseEnding balance