Transcript Slide 1

Concepts in
Enterprise Resource
Planning
2nd Edition
Chapter 1
Business Functions, Processes,
and Data Requirements
Chapter Objectives
• Name a business's main areas of operation.
• Differentiate a business process from a business
function.
• Identify the kinds of data that each main functional area
produces.
• Identify the kinds of data that each main functional area
needs.
• Define integrated information systems and state why
they are important
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ERP Overview
• Enterprise Resource Planning (ERP) programs are
software used by companies to manage information in
every area of the business.
• ERP programs help manage company-wide business
processes using a common database and shared
management reporting tools.
• ERP software supports the efficient operation of
business processes by integrating activities throughout a
business.
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What is ERP Anyway?
• “Enterprise Resource Planning”
• A set of integrated software modules for supporting all of
an enterprise’s processes in real-time.
• Sales, Production, Logistics, Purchasing, Accounting,
and Human Resources share relevant information
with each other as needed.
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Functional areas of operation
•
•
•
•
Marketing and Sales
Production and Materials Management (SCM)
Accounting and Finance
Human Resources
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Business Processes
• Managers now think in terms of business
process
• Take the customer’s perspective
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Your first business enterprise…
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Think in terms of business
processes…
• What are the processes
involved in running a
lemonade stand?
• Assume one person
• Assume cash
business
Inputs
Process
Outputs
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Sample Lemonade Processes
Get OK
From
Mom
Get
supplies
together
Make
Get OK
Make
lemonade
Sign(s)
From
Mom
Rake in
Make
Make
Set
up
Choose
The cash
lemonade
lemonade
table
location
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Sample Lemonade Processes
Get OK
From
Mom
Is it
feasible?
Get
supplies
together
What
supplies do
I need?
Make
Get OK
Make
lemonade
Sign(s)
From
Mom
How much
do we
make?
How much
to charge?
Rake in
Make
Make
Set
up
Choose
The cash
lemonade
lemonade
table
location
Is it worth
continuing?
Who are my
customers?
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Your enterprise partners…
Customers
Grocery
Friends
Mom/Dad
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Lemonade Stand Exercise
• Point of this exercise?
• We can view everything we do, personal and
professional as a set of processes.
• Start to think about how our decisions affect
others and their processes
What would happen if all the partners in this
process had access to each other’s information
in real-time?
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Functional Silo View of an Organization
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Functional Silo View of an Organization
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Functional Silo View of an Organization
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Functional Silo View of an Organization
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Functional Silo View of an Organization
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Functional Silo View of an Organization
Information?
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Cross-Functional Nature of the Order
Management Process
Quote
Commit
Produce
Check
Credit
Deliver
Bill
Collect
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Cross-Functional Nature of the Order
Management Process
Quote
Commit
Produce
Check
Credit
Deliver
Bill
Collect
Sales & Distribution
Production
Planning
Financial
Materials
Mgmt
Accounting
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Cross-Functional Nature of the Order
Management Process
Quote
Commit
Produce
Check
Credit
Deliver
Bill
Collect
Sales & Distribution
Production
Planning
Financial
Materials
Mgmt
Accounting
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Functional Areas of Operation
• Most companies have four main functional areas:
• Marketing and Sales (M/S)
• Supply Chain Management (SCM)
• Accounting and Finance (A/F)
• Human Resources (HR)
• Each main functional area consists of a number of
narrower business functions specific to the functional
area.
• Historically, businesses have organized themselves
according to business functions.
• Business Schools continue to be similarly organized.
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Functional Areas of Operation
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Information System
• An information system includes the:
• Computers
• People
• Procedures
• Software
• Required to store, organize and deliver information
• Information systems are a critical tool for integrating
business functions
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Business Processes
• A business process is a collection of activities that takes
one or more inputs and creates an output that is of value
to the customer
• The customer may be the traditional external customer
who buys the product or service, or an internal customer
(a colleague in another department)
• The business process view is the customer’s
perspective.
• The customer does not care that different functions are
involved in processing their order, and will not tolerate
mistakes and delays caused by poor coordination of
business functions
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Process View of Business
Logistics
Function
Production
Function
Purchasing
Function
Accounting
Function
Sales
Function
Customer Order Process
Material Order Process
Figure 1-3 A process view of business
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Integration of Business Functions
• Sharing data efficiently and effectively within and
between functional areas leads to more efficient
business processes
• Information systems that share data between
functional areas are called Integrated
Information Systems
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Another Look—Nova Chemicals
• According to John Wheeler, CIO of Nova Chemicals,
changing from a function-oriented view to a processoriented is a complicated process
• Business processes include:
• People with particular skill sets
• Information
• Tools
• Correct organizational culture
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Another Look—Nova Chemicals
• Nova has identified 3 core processes:
• Demand Chain Management
• Supply Chain Management
• Manufacturing Management
• And three enabling business processes
• Human Resources (includes corporate
communications)
• Treasury
• Information Technology
• Process Boards consisting of managers from various
functional areas define “best practices” and process
metrics—clear measurements to manage business
processes
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Lemonade Stand Functional Areas
• Marketing and Sales
• Develop products
• Determine pricing
• Promote products
• Take customer orders
• Make sales forecast
• Track repeat customers to send flyers or thank-yous
• Manage credit
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Lemonade Stand Functional Areas
• Supply Chain Management
• Buying raw materials (purchasing)
• Making lemonade
• Manage recipe
• Maintain manufacturing (cost) records
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Lemonade Stand Functional Areas
• Accounting and Finance
• Recording raw transaction data
• Sales, raw material purchases, payroll, cash
receipts
• Provide data for sales forecasting, credit
management, cash management
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Lemonade Stand Functional Areas
• Human Resources
• Recruit, train, evaluate and compensate employees
• Develop personnel plans (staffing) based on sales
• Determine compensation—depends on labor market
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Functional Area Information Systems
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Marketing and Sales
• Inputs
• Customer data
• Order data
• Sales trend data
• Per-unit cost
• Outputs
• Sales strategies
• Product pricing
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Functional Area Information Systems
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Supply Chain Management
• Inputs
• Product sales data
• Production plans
• Inventory levels
• Outputs
• Raw material orders
• Packaging orders
• Resource expenditure data
• Production and inventory reports
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Functional Area Information Systems
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Accounting and Finance
• Inputs
• Payments from customers
• Accounts receivables data
• Accounts payables data
• Sales data
• Production and inventory data
• Payroll and expense data
• Outputs
• Payments to suppliers
• Financial reports
• Customer credit data
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Functional Area Information Systems
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Human Resources
• Inputs
• Personnel forecasts
• Skills data
• Outputs
• Regulation compliance
• Employee training and certification
• Skills database
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Why implement ERP?
• Technological reasons
• Business reasons
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Other Organizations implemented ERP
for these Technology Reasons
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Y2K
disparate systems
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poor quality of
information
26
systems not integrated
19
difficulty integrating
acquisitions
obsolete systems
unable to support
growth
12
11
6
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Common Business Reasons for
implementing ERP
poor performance
27
high costs
not responsive
to customers
24
21
complex processes
20
unable to support
strategies
globalization
inconsistent
business processes
15
15
10
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Business Process
Reengineering
• BPR is the creation of entirely new and more effective
business processes, without regard for what has gone
before.
• BPR is cross-functional by its very nature
• BPR involves questioning assumptions
• Text prefers “Business Engineering” term to describe
redesign of entire process chains across functional and
even organizational boundaries
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ERP Industry
• 80% of Fortune 1000 have implemented
• includes MSFT, IBM, and APPLE
• 30-40%+ annual revenue growth for 1995-2000 (SAP
+22% 2005)
• partly attributable to Y2K re-engineering
• Major players
• SAP ---60% of market
• PeopleSoft
• JDEdwards, Baan/Invensys, Oracle, SCT, SGAI
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What is SAP?
• A series of integrated core business application modules
for transaction processing
• A set of functions that implement best business practices
• Client/Server software that processes business
transactions
• A methodology for implementing application software
• SAP (Pronounced “Ess, Ay, Pee”!) is industry standard
in:
• software, oil, chemicals, consumer goods, electronics
• Expanding into:
• healthcare, government, pharmaceuticals,
automotive, construction, retail, service
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What does SAP Stand For?
a. Solves All Problems
b. Select Another Package
c. Shut-up And Pay
d. Submit And Pray
e. Such A Pity
f. Systems, Applications & Products
Name That Module. . .
SD
Integrated
solutions
Comprehensive
functionality
FI
Sales &
Distribution
Financial
Accounting
MM
CO
Materials
Mgmt.
Controlling
PP
AM
Production
Planning
R/3
QM
Client / Server
ABAP/4
Open
systems
Quality
Management
Client / server
architecture
Enterprise data
model
PM
Plant Maintenance
Fixed Assets
Mgmt.
PS
Project
System
WF
Workflow
HR
IS
Human
Resources
Industry
Solutions
Designed
for all types
of business
Multinational
What are some of the typical roles on an
SAP Project?
a. Functional Module Analyst/Configurator
b. ABAPper Coding ICE or EDI
c. Integration Expert
d. Basis Consultant/System Admin.
e. All Of The Above
Summary
• All manufacturing companies have basic functional areas
of:
• Marketing and Sales: Sets product prices, promotes
products, takes customer orders, and creates sales
forecasts.
• Supply Chain Management: Develops production
plans, orders raw materials from suppliers, receives
the raw material into the facility, manufactures
products, and ships products to customers.
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Summary
• All manufacturing companies have basic functional areas
of:
• Accounting and Finance: Records sales transactions,
records customers’ payments, records suppliers’
invoices and payments to suppliers, and summarizes
operational data in managerial reports.
• Human Resources: Recruits, trains, compensates,
and oversees the evaluation of employees.
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Summary
• Functional areas are served by information systems,
which capture, process, and store data to provide
information needed for decision making.
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Summary
• Employees working in one functional area need data
from other functional areas. Functional area information
systems should be integrated, so shared data are
accurate and readily available.
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Summary
• Business managers are increasingly thinking in terms of
business processes that integrate functional areas.
• The business process view promotes efficiency and
competitiveness.
• Business processes require information sharing
between functional areas.
• ERP software provides this capability by using a
single common database.
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