Introduction to MIS
Chapter 5
Operations and Transactions

Copyright © 1998-2002 by Jerry Post

Introduction to MIS

1


Transactions
Additional
Stores

Bank

Supplier

POS
Terminals/
Registers

Introduction to MIS

Sales Reports

Process Control

Customers

 

EDI

Central Computer

 

2









 

Introduction to MIS

 

Strategic
Mgt.

Tactical
Management


Business Operations

DS
Tr
S
a
Pr Pr nsa
oc oc c t
es es i on
s C si n
on g
t ro
l



ES



Data Capture
Electronic and Mobile Commerce
Payment Mechanisms
Data Quality
Transactions
The Role of Accounting
HRM and Transaction Processing
Cases: Retail Sales
Appendix: Accounting


EI



S

Outline

3






Data Capture

Point of Sale
Process Control
Electronic Data Interchange

Additional
Stores

CEO Information

Strategy
Bank

Tactics


Warehouse
Inventory
Management

Supplier

Operations
POS
Cash
Registers

Introduction to MIS

EDI

Process Control

Customers

 

Sales Reports

Central Computer

 

4



Data Capture: Sales

Collecting transaction data at the point of sale ensures accurate data,
speeds transactions, and provides up-to-the-minute data to managers.

 

Introduction to MIS

 

5


Process Control

Various Production machines:  lathe, press, dryer, . ..

Control settings
and commands

Production data:
  Quantity
  Quality
  Time
  Machine status

 


Introduction to MIS

Control Terminal

 

6


Electronic Data Interchange


The price of paper





EDI






 

$30 to $40 for each purchase order
$24 to $28 for suppliers to handle
$12 for orders

0.32 for suppliers

Proprietary EDI
Commercial providers and standards

Introduction to MIS

 

7


EDI: Proprietary

Firms must support multiple data
formats and sometimes different
computers for each contact.

Customer 1

Queries &
Orders

Supplier

 

Introduction to MIS

Co

D nv
if f e
er rt
en d
t f ata
or
m
at

a
at
td
er
nv
Co

Production
Database
& Accounts

 

Order
Database
& Accounts

Invoices &
confirmation

Customer 2


8


EDI: Standards

Bank/EDI consolidator
Route
Messages

o
t  t
r
ve ar d
n
Co and
St

Messages
to/from
any customer

o
t  t
r
ve ar d
n
Co and
St Production
Database

& Accounts

Customer 1
Order
Database
& Accounts
to
 
t
er rd
v
n da
o
C an
St

Customer 2

Supplier

 

Introduction to MIS

 

9


EDI Standards






UN Edifact
US ANSI X12
Segments for each area
Detail data formats

Message
Segment
Composite Data Element
Data Element
Code Lists

 

Introduction to MIS

 

10


ANSI X12 Segments





Partial List of
segments
Detailed
specifications for
each segment



 

Data needed
Format

Introduction to MIS

 

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) 
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 

11


EDI On The Internet

The Internet



Advantages






 

Low cost.
Anyone can connect.
Worldwide reach.
Many tools and standards.
Designed to be robust,

minimizes impact of network
failures.

Introduction to MIS

 



Drawbacks


No service guarantee.






Delays might be
unacceptable.
Questionable reliability.

Security is challenging.

12


Transaction Objects



Example Attributes









Example Methods




 

Date & time
Price
Quantity
Item Number
Buyer
Seller
Store
Print
Verify

Introduction to MIS


Transactions
Date & Time
Value
Item
Buyer
Seller
Sellers

Items
Item_Id
Description
Location
...
Buyers
Buyer_Id
Address
Phone

Seller_Id
Address
Phone

 

13


Transaction Risks

Credit card company

accepts risks for a fee.

Vendor
1. Receive payment.

en
m
y
pa

cts
u
d
pro

t

e
or s

4. Government not
invalidate sale.

Government
2. Tax records.

1. Receive product.
2. Charged only as agreed.
3. Legal transaction.
Introduction to MIS


s
e
c
i
rv

3. Customer not
repudiate sale.

1. Transaction record.

Customer

 

2. Legitimate payment.

 

3. Identify fraud.
4. Track money for
other cases (drugs).

14


E-Commerce Risk Mitigation
Consumer is
protected by credit

card company.

ta )
a
d
d
r
a
e d it c
r
c
(
t
p
y
tity.
n
e
Encr
d
i
r
n do
e
v
y
f
i
r
Ve

vices
r
e
s
r
ts o
c
u
d
o
Vendor is not protected by
pr
credit card and has only
weak methods to verify
customer identity.

Customer
Introduction to MIS

Encrypt(Database)

Vendor

Encryption protects
transmission of data
and verifies identity
of vendor.

 


It is critical that vendors
protect their databases.

 

15


Shopping on the Internet


Advantages








 



Search and compare.
More tailored information.
Wider selection.
More competition.
Speed: especially if you can
download the product.

Comparison databases:
What did others buy?

Introduction to MIS

 

Drawbacks









Availability: requires a
computer and an ISP.
Slow speed limits graphics
and video.
Limited portability.
Trust: vendors and
consumers.
Taxation.

16


Electronic Commerce



Pre-Purchase


Static data sites.









Promotion.
Product specifications.
Pictures.
Schematics.
Pricing.
FAQs.

Purchase (requires
interactive).







Transmission security.
User identification.
Product selection.
Payment validation.
Order confirmation.

Interactive sites.




 



Configuration.
Compatibility.
Complex pricing.

Introduction to MIS

 

17


Electronic Commerce


Post-Purchase



Service.












Revenue generation.
Problem tracking.
Sales leads.

Resolve problems.
Answer questions.
Product evaluation.











Modifications.
Tracking customers.

Introduction to MIS

 

Software.
News and data.
Books.
Music.
Video.

Copyrights and piracy.






 

Digital content.

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.

18


E-Commerce and Taxes


Governor’s association.








Japan and United States.




 

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.
1998 agreement to no taxes
on Internet sales.
Goal of increased
international trade.

Introduction to MIS

 



U.S. Constitution.








Forbids taxation of interstate
commerce.
States currently ask
residents to pay a “use” tax
on purchases made out-ofstate.
Supreme court ruled that

states cannot require out-ofstate vendors to collect tax.
If a firm has a “presence” in
the state, it must collect the
tax.

19


Security and Trust


Security


Each transmission is
encrypted.





Trust


Prevent interception.
Keys generated by
certificate authority (e.g.,
Verisign).






There have been some
thefts of data (e.g., creditcard numbers.)
Vendor is motivated to
secure the server.
Commercial software exists
to provide secure sites.

Introduction to MIS

 

Is the vendor legitimate?





Security on individual
servers is the responsibility
of vendor.


 










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.

20



Internet International Issues


Jurisdiction questions for disputes.


Collection and payment for sales.













 

Coordinate and stop fraud.
Control harassment, spamming, and denial of service attacks.

Encryption restrictions.





Currently rely on credit cards.
Many people do not use credit cards.
Does not protect vendor.

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.

Introduction to MIS

 

21


B2B Auction Markets
Buyers and sellers
connected through a
Web site.

 

Introduction to MIS

 

22



Payment Mechanisms


Credit card drawbacks






Characteristics needed








Low enough costs to support payments less than $1.
Secure transmission.
Secure storage.
Authentication mechanism.
Easy translation to traditional money.

Alternatives




 

High transaction costs.
Not feasible for small payments.
Do not protect the merchant.

Mobile phone bill.
Smart cards.

Introduction to MIS

 

23


Digital Cash Payment
Trusted
Party

Conversion to
real money.

Bank

(A) Consumer
purchases a cash
value that can be
used only once.

(C) Cash amount is
verified and added to
vendor account.
(B) Customer choose
product, sends ID or
digital cash number.

Vendor

 

Introduction to MIS

 

Consumer

24


Data Quality


Integrity







Changes by two people at
same time gives bad data.

Summaries










Cost
Errors harder to spot.
Transmission costs.
Difficulty of searching.
System overload.

Introduction to MIS

 

Too much detail.
Hard to get detail.

Time





Volume


 

Errors in data entry.
Missing data.
Failure to make updates.

Multitasking/Concurrency








Report and decision
deadlines.
Departments get data at
different times.
Sequencing problems.

25