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Tesco is one of the UK's leading supermarkets, supplying customers nation wide with groceries and a vast array of different services. In the past Tesco started as simply a supermarket, these days they offer their customers insurance, mobile phones, and even electrical goods. Tesco even offer their customers a reward system where customers get a 1% return on their purchases, this 1% comes back to the customer in the form of a voucher which can be used in a variety of different ways.
Tesco, like a lot of UK supermarkets, is a very big organisation comprising of a variety of systems, these systems assist the company in operating at levels ranging from the operational level to executive. It is the structure of these systems which allow the business to run effectively, to ensure that the correct decisions are made and reports are compiled for effective management.
This paper will discuss the characteristics of two of the core management information systems that Tesco use and the ways in which they might apply them to their business.
Transaction Processing Systems
Transaction Processing Systems (or TPS for short) are vital systems in any business, these systems are responsible for serving the operational level of an organisation. Examples of some TPS systems would include:
- Recording payments received for goods and services.
- Placing orders for products or services.
- Withdrawing money at a cash machine.
TPS's are in contact with the customers all of the time and if one were to fail then it would be immediately apparent, if Tesco's till systems were to fail then the customer would be aware of this immediately. This outlines the great importance of these systems, while they may seem to be repetitive, they must ultimately be reliable. This means that although 100% reliability cannot be guaranteed, the TPS must therefore be able to detect and correct errors. (Wikipedia, 2009. Transaction Processing System.)
However, not all transactions are processed immediately; there are two different types of transaction systems. Real time processing systems process the transactions immediately, this method keeps information up-to-date and information within the reports will be consistently accurate. Batch processing systems store the information in batches and are processed at slower rates, this method of processing means that reports do not always have up-to-date information. Businesses requiring up-to-date reports will opt for a real time processing system. (Bocji, P 2003 p238)
Tesco will benefit from these Transaction Processing Systems in various ways. These systems will hold and collect information about customer purchases, especially those who have a customer loyalty card; it will assist in being able to target other products at these customers to help increase sales. Automatic links with suppliers will be improved as stock can be re-ordered as soon as it has been sold, greatly reducing the physical effort of stock ordering and minimising the errors involved with manual ordering. Greater effectiveness of customer service as prices can be modified with ease, a greater choice of products can be attained and lower prices to the customer.
Tesco uses TPS's in their EPOS systems (Electronic Point of Sale) these systems scan barcodes and communicate with the in-house system. This in-house system will record all the data of transactions and stock which needs to be re-ordered, probably in a batch system which can then be transferred to the mainframe at the end of the day. This information will then be accessible to higher management for generating reports and will provide the distribution centre with orders for the following day. This information will also provide ordering information for 3rd party suppliers.
Decision Support Systems
Decision Support Systems (or DSS) are the management information systems aimed at supporting the managerial level. These systems provide information, usually in the form of ad hoc reports to assist with decision making.
The models bases that power DSS's vary from standard analysis to complex mathematical relationships between variables in the data. DSS's are normally accessed from a computer, giving the manager the ability to issue the DSS software commands and request specific data. The output from the DSS software is usually in an easy to understand text and visual format (such as graphs and charts).
DSS's are a combination of special models that help with information analysis, forecasting and planning. Company performance data is also part of this integration. DSS are usually not a corporate system and tend to be more departmentally targeted, usually acting as a marketing assistance. Normally DSS's are used as a specialist system such as an expert systems or data warehousing, however they are aimed to be very easy to use and should “integrate across all levels in recognition of the overlap between operational, tactical and strategic decisions”. (Bocij, P 2003 p253)
Expert systems replicate the knowledge and decision making skills that a professional in a certain field would have. These systems are vital tools in decision support; a good example would be making a credit decision on whether or not to give someone a personal loan.
Data warehousing is a type of business intelligence software that analyses transaction information to enhance a company's competitiveness. The data warehouse itself is a massive database which contains a company's sale information. Data mining is used in association with data warehousing and is an automated way to find patterns in data. Data clustering can also be utilised in order to find relationships between groups or portions of the data. (Wikipedia, 2009. Data Mining)
DSS's can be used to create problems, managers can analyse the data when certain variables are changed, or looking at different scenarios. Some types of the occurrences include:
- Data Mining, as already discussed.
- Goal Seeking Analysis, changing variables one at a time until a desired goal is achieved, doing this enables the manager to see what goals need to be set in specific areas of the business to attain desired result.
- What If Analysis, like goal seeking analysis but involves changing a number of variables at once or changing a relationship within the variables, while keeping an eye on the changes in the other variables.
- Optimization analysis, to find an optimum value for the variables given certain conditionals.
Taking Tesco as an example you can assume that via Transaction Processing Systems, various data is collected in the stores. This information is stored in the company main frame system and can be accessed by departmental managers for them to generate reports via expert systems or data mining/warehousing. This enables the managers to get information such as how many customers enjoy eating chicken in comparison to those who prefer beef; this can then be coupled with information such as what other products the consumer purchases along with these items.
The managers at Tesco could then find information about item affinity, a process that would highlight the likelihood of a number of items being purchased together. This information is of great importance when considering what special offers to put on, it could aid in finding other suitable products to put close to these special offers. (Information Management, 2006)
The success of item affinity is evident by the story of the beer and diapers, it was found that men were buying diapers along with beer on Friday nights. This is an unusual occurrence that you wouldn't normally predict; however, it was thanks to data mining and item affinity that this was uncovered. (The Register, 2006)
Bocji, P (2003). Business Information Systems: Technology, Development and Management for the e-business 2nd Ed. Gosport: Ashford Colour Press Ltd.
Information Management, (2006) Demystifying Market Basket Analysis. Information-management.com [online] < http://www.information-management.com/specialreports/20061031/1067598-1.html> updated October 2006, accessed 6th December 2009.
The Register, (2006) The parable of the beer and diapers. Theregister.co.uk [online] < http://www.theregister.co.uk/2006/08/15/beer_diapers/> updated 15th August 2006, accessed 8th December 2009.
Wikipedia, (2009) Data Mining. Wikipedia.org [online] <http://en.wikipedia.org/wiki/Data_mining> accessed 8th December 2009.
Wikipedia, (2009) Transaction Processing System. Wikipedia.org [online] <http://en.wikipedia.org/wiki/Transaction_Processing_System> accessed 8th December 2009.