Transaction Processing System (TPS)

• A transaction processing system (TPS) supports the operational level of the organization.
• A TPS keeps track of daily, routine transactions within the organization.
• Low-level managers at the operational level make decisions based on the data collected from the relevant TPS.
• A TPS usually has a high volume of data because this data is collected constantly on a daily basis.

Examples of Transaction Processing Systems

Tracking the time that employees arrive for and leave from work. Many companies use information systems for employee attendance. These can be in the form of a computerized punch card, a computer screen to log into, or a card that the employee swipes whenever entering or leaving the building (Figure 2.1).

Daily sales tracking. Daily tracking of all sales at a retail store is also accomplished with the use of a TPS (Figure 2.2). Companies can have a specialized software program that is used on their point-of-sale systems. This is an automated process that captures information about sales, and that data is stored as part of the TPS. This type of information system is a central part of the business, and data collected via the TPS is used to improve decision-making throughout many different aspects of the organization. For example, understanding daily sales over a long period will help identify customer purchase patterns. This information can provide valuable input for managers to determine how many, how frequently, and what type of products they need to reorder.

Management Information System (MIS)

• A management information system (MIS) supports the middle, or managerial, level of the organization.
• An MIS uses data collected from a TPS to generate routine reports.
• An MIS organizes and analyzes data to give mid-level managers the tools to make better decisions.
• MIS tools are also classified as business intelligence tools because they assist managers in making informed decisions.

Examples of Management Information Systems

A spreadsheet application, such as Microsoft Excel, function as an MIS. A manager can use a spreadsheet to generate routine reports (Figure 2.3) and improve decision-making.

Samples of routine reports include

• a monthly report tracking the sales of bananas,
• a monthly report showing the number of times an employee was absent from work, and
• a weekly report showing the average delivery time for customer orders.

Decision Support System (DSS)

• A decision support systems (DSS) supports the middle, or managerial, level of the organization.
• A DSS uses data collected from an MIS, TPS, and external sources to provide business intelligence for nonroutine decision-making.
• Mid-level managers are the typical users of a DSS.
• A nonroutine decision can occur at an unexpected time in which the manager needs to make a decision.

Examples of Nonroutine Decisions That a DSS Can Support

• What is the quickest route for delivering a product?
• How can we get raw materials from a supplier if a natural disaster disrupts the normal routine?
• If the price were significantly reduced, how would that impact the sale of our product?

Executive Support System (ESS)

• An executive support system (ESS) is used at the executive level of the organization.
• An ESS is used by senior managers to improve decision-making.
• An ESS uses both internal and external data to support decision-making.
• Examples of internal data are an MIS and DSS that feed data to the ESS.
• External data sources include competitors, government agencies, and any other special-interest groups that exist within the organization's sphere of influence. For example, an organization that manufactures baby food will collect information from consumer reporting agencies that provide reviews to the public.
• An ESS provides data to senior managers in the form of charts, graphs, and tables.
• Data in an ESS is usually presented via a digital dashboard that shows summary data for the entire organization. A digital dashboard is similar to the concept of a dashboard in a car (Figure 2.6). The driver of the car can quickly get an idea of how well the car is working by looking at the dashboard. The dashboard of a car will show information about fuel, mileage, speed, oil, and many other variables, depending on the type of vehicle. Similarly, the digital dashboard provides the senior manager data about all aspects of the organization to aid decision-making.
• Long-term planning and forecasting are two examples of decisions that a senior-level manager makes. Business intelligence and analytic tools available through the ESS support this process (see example in Figure 2.7).

Enterprise Applications

• Enterprise applications are cross-functional; they are used by multiple functional areas of the business.
• Enterprise applications can also span the three different levels of the organization: operational, managerial, and executive.
• Four main types of enterprise applications are used by organizations:
  • Enterprise resource planning (ERP) systems: These systems integrate fragmented data into a single repository to improve operational efficiency and decision-making.
  • Supply chain management (SCM) systems: These systems support acquisition, sourcing, production, and delivery of the company's products.
  • Customer relationship management (CRM) systems: These systems support the company's relationship with its customers.
  • Knowledge management systems (KMS): These systems collect, store, and disseminate the organization's knowledge and expertise (both internal and external) to improve decision-making.

Each of the four enterprise systems listed above is discussed in more detail in later lessons.