Chapter - 4
Operations & Transactions
Branches / stores
Central Database Financial Institutions
Applications Web services
/ Extranets Suppliers
•Point of Sale
Collecting transaction data at the point of sale ensures accurate data, speeds
transactions, and provides up-to-the-minute data to upper levels of MIS.
Production Data & Process Control
Production machinery & equipment ( on-line, off-line)
Data may be
collected on- Production data:
line or via Quantity
media Quality Control/Surveillance/Audit/Monitoring
Electronic Data Interchange
• Generally speaking, EDI is considered to be a technical
representation of a business conversation between two
entities, either internal or external.
• The EDI (Electronic Data Interchange) standards were
designed to be independent of communication and
• EDI can be transmitted using any methodology agreed to
by the sender and recipient. This includes a variety of
technologies, including asynchronous modem,FTP, Email,
HTTP, MQ, etc.
EDI: Proprietary Customer 1
Firms must support multiple data Queries &
formats and sometimes different Orders
computers for each contact.
& Accounts Customer 2
Messages Customer 1
EDI consolidator Database
Partial List of ANSI X12
104 - 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)
140 - Product Registration
EDI On The Internet
• Advantages • Disadvantages
– Low cost. – No service guarantee.
– Anyone can connect. • Delays might be
– Worldwide reach.
• Questionable reliability.
– Many tools and
– Security is challenging.
– Designed to be robust,
minimizes impact of
Transaction Objects : trade data
• Example transaction attributes Transactions Items
Date & Time Item_Id
– Date & time Location
– Quantity – volume Buyer
– Value ( price * quantity) Seller
– Item Number Phone
– Buyer Seller_Id
– Seller Address
Transaction Risks for Payment
1. Receive payment.
2. Legal payment.
accepts risks for 3. Customer not reject
a fee. payment sale.
Vendor 4. Government not
1. Transaction record.
2. Tax records.
1. Receive product. 3. Identify fraud.
2. Charged only as agreed. 4. Track money for other
3. Legal transaction. cases
E-Commerce Risk Mitigation
It is critical that vendors
Consumer is protect their databases.
protected by credit Encrypt(Database)
Encryption protects Vendor
transmission of data
and verifies identity
Vendor is not protected
by credit card and has
only weak methods to
Customer verify customer identity.
(No signature, id, face,
Shopping on the Internet
• Advantages • Disadvantages
– Search and compare. – Availability: requires a
– More tailored computer and an ISP.
information. – Slow speed limits
– Wider selection. graphics and video.
– More competition. – Limited portability
– Speed: especially if you – Trust: vendors and
can download the consumers.
product. – Taxation.
– Comparison databases:
What did others buy?
• Pre-Purchase activities (non- • Purchase (requires
interactive or interactive) interactive).
• Product specifications.
– Transmission security.
– User identification.
– Product selection.
– Payment validation.
– Order confirmation.
– Interactive sites.
• Complex pricing.
• Post-Purchase Activities • Digital content on internet
• Revenue generation.
• Problem tracking.
– News and data.
• Sales leads.
– Resolve problems. – Music.
– Answer questions. – Video.
– Product evaluation.
• Tracking customers.
Security and Trust
• Security • Trust
– Is the vendor valid?
– Each transmission is
encrypted. • Consider: Internet
• Prevent interception.
• What if offshore vendor
• Keys generated by refuses to pay off a bet?
certificate authority (e.g.,
• As long as Internet
gambling is illegal
– Security on individual consumer has no choice.
servers is the responsibility • Otherwise, use credit
of vendor. cards and rely on banks.
• There have been some • Secure certificates.
thefts of data (e.g., credit-
– Is the customer valid?
• Vendor is motivated to
secure the server. • Rely on credit card data.
• Commercial software • Some vendors will ship
exists to provide secure only to billing address.
sites. • Certificate authority.
Internet International Issues
• Authority questions for disputes.
– Collection and payment for sales.
• Currently rely on credit cards.
• Many people do not use/prefer credit cards.
• Does not protect vendor vey much
– Coordinate and stop fraud
– Control harassment, spamming, and denial of service attacks.
• Encryption restrictions.
– France does not allow citizens to use encryption at all.
• Different privacy rules.
• Nations have differing perspectives of “offensive” content.
• Credit card drawbacks
– High transaction costs.
– Not feasible for small payments.
– Do not protect the merchant.
• Characteristics needed
– Low enough costs to support tiny payments
– Secure transmission.
– Secure storage.
– Authentication mechanism.
– Easy translation to traditional money.
– Bill the mobile phone
– Smart cards – prepaid cards
Digital Cash Payment
purchases a cash
(C) Cash amount is value that can be
verified and added to used only once.
Vendor (B) Customer choose
product, sends ID or Consumer
digital cash number.
• Integrity • Summaries
– Errors in data entry.
– Too much detail.
– Missing data.
– Hard to get detail.
– Failure to make updates.
– Duplicate data
• Multitasking/Concurrency • Time
– Changes by two people at
– Report and decision
same time gives bad data.
– Unhandled concurrency
– Departments get data at
• Volume different times.
– Cost (disk, tape, time, backup) – Sequencing problems.
– Errors harder to spot.
– Transmission costs over lines
– Difficulty of searching.
– System overload.
Multitasking and Concurrency
• Data Integrity
• Multitasking & concurrency
• Data volume
• Data summaries
• Financial data and reports
• What do things really cost (cost
• The accounting cycle
• Checks and balances
– Separation of duties
• 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
– Allocate department expenses • General Features
• Accounts Receivable – Printer support
– Automatic early discounts – Use of preprinted forms
– Interest on late payments – Custom reports
– Multiple shipping addresses – Custom queries
– Sales tax – Security controls
– Automatic reminder notices – Technical support costs
– Automatic monthly fees – Often legislation changes
– Keep monthly details – New year operations
Loans & Notes Planning Reports
Management, Reports Shareholder
Exchange Capital Acct
Payroll & Produce Tax Filings
Expenses Employee Management
Benefits Tax data Tax
Inventory & Sales Tax
Orders & Assets
Accounts Payables Inventory
Payable Management, Sales & Receivables
& Fixed Asset
& Cost Acct. Customers
Payables Inventory Changes Inventory Changes
The Role of Accounting
• Transaction Data
• Purchases, Sales, Loans, and Investments
• Inventory Control
• Process and Controls
– Double-Entry Systems
– Separation of Duties
Human Resources Management
& Salary Merit
Merit & Government
Salary Reports Government
Process Opportunity Data
Payroll Employee Data
Job & Applications
Sales Data &
Employees Commission Job