1. Introduction to MIS1 Copyright © 1998-2002 by Jerry Post Introduction to MIS Chapter 5 Operations and Transactions

2. Introduction to MIS2 Central Computer Sales Reports POS Terminals/ Registers Customers EDI Supplier Bank Additional Stores Process Control Transactions

3. Introduction to MIS3 Outline Data Capture Electronic and Mobile Commerce Payment Mechanisms Data Quality Transactions The Role of Accounting HRM and Transaction Processing Cases: Retail Sales Appendix: Accounting Business Operations Tactical Management Strategic Mgt. EIS ES DSS Transaction Processing Process Control

4. Introduction to MIS4 Data Capture Point of Sale Process Control Electronic Data Interchange Central Computer Sales Reports POS Cash Registers Customers EDI Supplier Bank Process Control Additional Stores Strategy Tactics Operations Warehouse Inventory Management CEO Information

5. Introduction to MIS5 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.

6. Introduction to MIS6 Process Control Various Production machines: lathe, press, dryer,... Control Terminal Production data: Quantity Quality Time Machine status Control settings and commands

7. Introduction to MIS7 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

8. Introduction to MIS8 EDI: Proprietary Supplier Customer 1 Queries & Orders Invoices & confirmation Production Database & Accounts Order Database & Accounts Convert data Different format Customer 2 Firms must support multiple data formats and sometimes different computers for each contact.

9. Introduction to MIS9 EDI: Standards Supplier Customer 1 Production Database & Accounts Order Database & Accounts Customer 2 Bank/EDI consolidator Convert to Standard Route Messages to/from any customer Convert to Standard Convert to Standard

10. Introduction to MIS10 EDI Standards Message Segment Composite Data Element Data Element Code Lists UN Edifact US ANSI X12 Segments for each area Detail data formats

11. Introduction to MIS11 ANSI X12 Segments Partial List of segments Detailed specifications for each segment Data needed Format 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

12. Introduction to MIS12 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. Drawbacks No service guarantee. Delays might be unacceptable. Questionable reliability. Security is challenging.

13. Introduction to MIS13 Date & Time Value Item Buyer Seller Item_Id Description Location... Transactions Items Buyer_Id Address Phone Seller_Id Address Phone Buyers Sellers Transaction Objects Example Attributes Date & time Price Quantity Item Number Buyer Seller Example Methods Store Print Verify

14. Introduction to MIS14 Transaction Risks payment products or services Vendor Customer Government 1. 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.

15. Introduction to MIS15 E-Commerce Risk Mitigation products or services Vendor Customer Encrypt(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.

16. Introduction to MIS16 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? Drawbacks Availability: requires a computer and an ISP. Slow speed limits graphics and video. Limited portability. Trust: vendors and consumers. Taxation.

17. Introduction to MIS17 Electronic Commerce Pre-Purchase Static 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.

18. Introduction to MIS18 Electronic Commerce Post-Purchase Service. 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.

19. Introduction to MIS19 E-Commerce and Taxes Governors 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.

20. Introduction to MIS20 Security and Trust Security Each 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. Trust Is 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.

21. Introduction to MIS21 Internet International Issues Jurisdiction 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.

22. Introduction to MIS22 B2B Auction Markets Buyers and sellers connected through a Web site.

23. Introduction to MIS23 Payment Mechanisms Credit card drawbacks High transaction costs. Not feasible for small payments. Do not protect the merchant. Characteristics needed Low enough costs to support payments less than $1. Secure transmission. Secure storage. Authentication mechanism. Easy translation to traditional money. Alternatives Mobile phone bill. Smart cards.

24. Introduction to MIS24 Digital Cash Payment Consumer Vendor Trusted Party Conversion to real 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.

25. Introduction to MIS25 Data Quality Integrity Errors in data entry. Missing data. Failure to make updates. Multitasking/Concurrency Changes by two people at same time gives bad data. Volume Cost Errors harder to spot. Transmission costs. Difficulty of searching. System overload. Summaries Too much detail. Hard to get detail. Time Report and decision deadlines. Departments get data at different times. Sequencing problems.

26. Introduction to MIS26 Concurrency and Data Integrity Customer Accounts Sanchez 500 Transaction ATransaction B 1) receive 300 payment 2) read balance (500) 5) subtract payment 6) store new result (200) Sanchez 200 3) new purchase (350) 4) read balance (500) 7) add purchase 8) store new result (850) Sanchez 850 Multitasking and Concurrency Data Integrity Multitasking & concurrency Data volume Data summaries Time

27. Introduction to MIS27 Accounting Financial data and reports What do things really cost? The accounting cycle Inventory Checks and balances Double-entry Separation of duties Audit trails

28. Introduction to MIS28 Accounting Software General Ledger Sample chart of accounts Automatic posting Automatic entry of vendors Fiscal years Keep past data books open Post to prior years Allocate department expenses Accounts Receivable Automatic early discounts Interest on late payments Multiple shipping addresses Sales tax Automatic reminder notices Automatic monthly fees Keep monthly details Accounts payable Check reconciliation Automatic recurring entries Monitor payment discounts Select bills from screen Pay by item, not just total bill General Features Printer support Use of preprinted forms Custom reports Custom queries Security controls Technical support costs

29. Introduction to MIS29 Accounting Suppliers Customers Management Shareholders Banks and Creditors Departments & Employees Sales & Accounts Receivable Produce Management Accounting Reports Produce Shareholder Reports Sales & Receivables Inventory Changes Purchases & Payables Loans & Notes Expenses Equity Shareholder Reports Management Reports Product Inventory Orders & Accounts Payable Inventory Management, & Fixed Asset & Cost Acct. Payroll & Employee Benefits Cash Management, Investments, Foreign Exchange Supply & In-process Inventory Governments Tax Filing & Planning Strategic & Tactical Planning Inventory Changes Payables Capital Acct Sales Tax Tax Filings Tax data Receivables Inventory & Assets Payroll Planning Reports Planning Data

30. Introduction to MIS30 The Role of Accounting Transaction Data Purchases, Sales, Loans, and Investments Inventory Control Process and Controls Double-Entry Systems Separation of Duties Audit Trails

31. Introduction to MIS31 HRM Management Managers Employees Customers Government Process Payroll Benefits Vacation Compile Merit Evaluations & Salary Changes Job Applicants Produce Management Employee Reports Screen Jobs & Applications Produce Government Reports Employee Data Files Employee Data Evaluations Salary Merit & Salary Sales Data & Commission Employee Data Merit Applicant Data Employee Summaries Job & Applicant Data EEO Data Government Reports Management Reports

32. Introduction to MIS32 Cases: Retail Sales

33. Introduction to MIS33 Cases: Home Depot Toys R Us Walgreens What is the companys current status? What is the Internet strategy? How does the company use information technology? What are the prospects for the industry? www.homedepot.com www.toysrus.com www.walgreens.com

34. Introduction to MIS34 Appendix: Balance Sheet Assets Current Assets Plant and Equipment Liabilities and Owners Equity Current liabilities Long-term liabilities Owners equity Total liabilities and owners equity Albertsons, 2000 Numbers in thousands.

35. Introduction to MIS35 Appendix: Earnings Sales Cost of merch. sold Gross profit Operating and admin. exp. Operating profit Interest income Interest expense Earnings before taxes Federal and state taxes Net earnings Shares Earnings per share

36. Introduction to MIS36 Appendix: Cash Flow Net earnings Cash flow from operations Depreciation and amortization (Gain) or loss on asset sales (Increase) decrease in current assets Receivables Inventories Increase (decrease) in cur. liabilities Accounts payable Accrued payroll and benefits Income taxes payable Change from investing Property, plant, equipment Proceeds from sales of assets Cash used in investing Change from financing Proceeds from long-term borrowing Payments of long-term borrowing Stock changes Cash dividends

37. Introduction to MIS37 Appendix: Equity Beginning balance Net earnings/retained earnings New stock Dividends Stock repurchase Ending balance