Graduate Program in Business Information Systems BIS 581 Business Process Management Lectures 9-10 Aslı Sencer Department of Management Information Systems

Business Process Management – 9-10 Integration with ERP Systems

Outline Types of Enterprises Systems Types of Data in ES SAP Overview Procurement Process Key Concepts and Assumptions Conceptual Framework Physical Flow Document and Data Flow Information Flow Financial Impact Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Enterprise Systems Three stages of evolution Stage 1: Stand-alone Mainframe Systems Stage 2: Client-Server Architecture Stage 3: Service-Oriented Architecture (SOA) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

The New Stack – Process Is the Next Platform Client Mainframe Client Server SOA Application Data Management Composites OS and Database OS DB Custom Punch Card or Terminal (10’s of users) PC or Internet (1000’s of users) Request Form Any Device (Millions of users) Applications Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

3-tier Client Architecture Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Types of Enterprise Systems The ES Application Suite Enterprise Resource Planning (ERP) Supply Chain Management (SCM) Supplier Relationship Management (SRM) Product Lifecycle Management (PLM) Other classifications Best of breed vs. Niche applications Software as a service (SaaS) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

ERP Systems Evolved in 1990’s in parallel to advances in BPR and globalization. ERP’s are the world’s largest and most complex ES’s. Focus on internal operations of an organization, integrate functional and cross functional (intracompany) business processes. Typical ERP systems include Operations (production) Human resources Finance and Accounting Sales and Distribution Procurement

Management of intercompany processes: SCM and SRM SCM connects the companies that supply the materials it needs to make its products. SCM help companies plan for their production demand requirements and optimize complex transportation and logistics for materials. SRM systems manage the overal relationships with the material suppliers. SRM systems contain functonality to manage the quotation and contracts processes.

CRM and PLM CRM systems connect a company’s ERP system to those of its customers. CRM systems provide companies with capabilities to manage marketing, sales and service for its customers. PLM systems help companies administer the process of research, design and product management.

The application suite Example: SAP, Oracle Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SAP ERP Solution Map Shared Service Delivery SAP NetWeaver End-User Service Delivery Analytics Financial Analytics Operations Analytics Workforce Analytics Financials Financial Supply Chain Management Treasury Financial Accounting Management Accounting Corporate Governance Human Capital Management Talent Management Workforce Process Management Workforce Deployment Procurement and Logistics Execution Procurement Inventory and Warehouse Management Inbound and Outbound Logistics Transportation Management Product Development and Manufacturing Production Planning Manufacturing Execution Product Development Life-Cycle Data Management Sales and Service Sales Order Management Aftermarket Sales and Service Professional-Service Delivery Corporate Services Real Estate Management Enterprise Asset Management Project and Portfolio Management Travel Management Environment, Health, and Safety Compliance Mgmt. Quality Management Global Trade Services Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SAP Supply Chain Management SAP NetWeaver Demand & Supply Planning Demand Planning & Forecasting Safety Stock Planning Supply Network Planning Distribution Planning Service Parts Planning Procurement Strategic Sourcing Purchase Order Processing Invoicing Manufacturing Production Planning & Detailed Scheduling Manufacturing Visibility & Execution & Collaboration MRP based Detailed Scheduling Warehousing Inbound Processing & Receipt Confirmation Outbound Processing Cross Docking Warehousing & Storage Physical Inventory Order Fulfillment Sales Order Processing Billing Service Parts Order Fulfillment Transportation Freight Management Planning & Dispatching Rating & Billing & Settlement Driver & Asset Management Network Collaboration Real World Awareness Supply Chain Event Management Auto ID / RFID and Sensor Integration Supply Chain Visibility Strategic Supply Chain Design Supply Chain Analytics Supply Chain Risk Management Sales & Operations Planning Supply Network Collaboration Supplier Collaboration Customer Collaboration Outsourced Manufacturing Supply Chain Management with Duet Demand Planning in MS Excel Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SAP Supplier Relationship Management SAP NetWeaver Purchasing Governance Global Spend Analysis Category Management Compliance Management Sourcing Central Sourcing Hub RFx / Auctioning Bid Evaluation & Awarding Contract Management Legal Contract Repository Contract Authoring Contract Negotiation Contract Execution Contract Monitoring Collaborative Procurement Self-Service Procurement Services Procurement Direct / Plan-Driven Procurement Catalog Content Management Supplier Collaboration Web-based Supplier Interaction Direct Document Exchange Supplier Network Supply Base Management Supplier Identification & Onboarding Supplier Development & Performance Management Supplier Portfolio Management Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SAP Product Lifecycle Management SAP NetWeaver Product Management Product Strategy and Planning Product Portfolio Management Innovation Management Requirements Management Market Launch Management Product Development and Collaboration Engineering, R&D Collaboration Supplier Collaboration Manufacturing Collaboration Service and Maintenance Collaboration Product Quality Management Product Change Management Product Data Management Product Master and Structure Management Specification and Recipe Management Service and Maintenance Structure Management Visualization and Publications Configuration Management PLM Foundation Product Compliance Product Intelligence Product Costing Tool and Workgroup Integration Project and Resource Management Document Management Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SAP Customer Relationship Management Web Channel Interaction Center Partner Channel Management Trade Promotion Management Business Communication Management Marketing Marketing Resource Management Segmentation & List Management Campaign Management Real-Time Offer Management Lead Management Sales Sales Planning & Forecasting Sales Performance Management Territory Management Accounts & Contacts Opportunity Management Quotation & Order Management Pricing & Contracts Incentive & Commission Management Time & Travel Service Service Order Management Service Contract Management Complaints & Returns In-House Repair Case Management Installed Base Management Warranty Management Resource Planning Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Other classifications of ERP systems Today’s global comanies typically have an ES lanscape that includes custom and packaged applications from several vendors Best of Breed Applications: Isolated to one process or part of a process that evolves from departmental applications Ex: i2 is a popular SCM system. Ariba is a popular procurement system. Niche applications: Small and independent software vendors offer highly specialized niche app’s. Ex: Vendova is a small ISV that produces a pricing management tool to assist retailers in maximizing profit for retail sales. It pulls product and price info from several ES’s. Other classifications: Size of enterprise: SAP and Oracle for companies with more than 1000 employees Method of delivery: Install the hardware and software in the facility (three-tier or SOA configurations) versus salesforce.com and Netsuite deliver ES entirely from web. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Types of Data in ES Organizational Data Master Data Transaction Data Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Organizational Data Define the organizational structure of the enterprise Includes definitions of: Companies (subsidiaries, etc.) Divisions based on, product or geographical hierarchy Sales organizations Purchasing organizations Physical facilities: plants, warehouses, distribution centers HR organization: Functional areas, reporting relationships Data rarely changes Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Master Data Define key entities in an organization Customers Basic information: name, address, contact information Financial information: payment terms, methods Sales information: delivery terms Vendors / suppliers Similar information as customer Products Basic data: description, weight, color Purchasing data Sales data Manufacturing data Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Master Data Employees Data changes occasionally Basic data Personal data: dependents Payroll data Tax data Data changes occasionally Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Transaction Data Data that is the consequence of day-to-day transaction Who, what, when, where, how, how much Sales Customer, products, quantities, dates and times, location (shipping, delivery), sales person Purchase Vendor, products, quantities, dates and times, location (delivery), sales person, requester Production Materials, quantities, facilities, resources (machine, people), dates and times, locations (storage, production) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Super Skateboard Builders, Inc. History Product Line Customers Vendors Plant Layout Employees Information Systems Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Standard Price (Manufacturing or Purchase Cost) SSB, Inc. - Product List Product Number Product Description Standard Price (Manufacturing or Purchase Cost) Wholesale Price MSRP DXSB1000 Deluxe Skateboard $58.00 $96.00 $160.00 STSB2000 Standard Skateboard $40.00 $66.00 $110.00 ENSB3000 Entry-Level Skateboard $34.00 $45.00 $75.00 HLMT5000 Helmet $20.00 $27.00 SHRT4000 T-Shirt $7.00 $10.00 $16.00 FAID6000 Skateboard First Aid Kit Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SSB, Inc. - Customer List Customer Number Name Address City State Zip 1 World Wide Skateboard Distributors 1229 Main Street AnN arbor MI 48109 2 Extreme Skateboard Sports, Inc. 5000 Rensellear Ave Detroit 48202 3 "Waldo" Autry 3012 Haslett Road Lansing 48906 4 Sporting Goods, Inc. 6903 28th Street Grand rapids 49508 5 Flying Acrobats, Inc. 274 Adams Street Holland 49423 6 MI Sporting Company 3000 Alpine Ave 49544 7 Dawgs 4005 State Street SE saginaw 48710 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SSB, Inc. - Vendor List Vendor Number Vendor Name City State Zip Materials Supplied 100000 Nutcase Supplies Grand Rapids MI 49525 Nuts, bolts 100001 Skatelubbers, Inc. First aid kit, t-shirt, helmet 100002 Grand Skateboard Supplies Trucks, riser pads, grip tape, decks, Entry level skateboard, First aid kit 100003 Black Widow Skateboards, Inc. Holland 49424 Entry level skateboard, First aid kit, t-shirt, helmet 100004 Spotted Owl Lumber Cascade 49546 Maple ply, Entry level skateboard 100005 Van Go Paint Supplies Kentwood 49508 sealers, paints 100006 The Dutch Monster 49504 Boxes, labels, glue 100007 Whitewater Development Company jonesboro AR 72401 Building space Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SSB, Inc. - Plant Layout Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SSB, Inc. - Organizational Chart John Z. Boeve (President) Maria Rivera (Office Manager) Catherine VanderBos (Plant Manager) Charles Skivers (Shop Floor) Mark McKendry (Shop Floor) Patrick Stevens (Sales Manager) Shana Smith (Accountant) David Bloomberg (Warehouse Manager) Tom Jones (Warehouse) Martha Seward (Purchasing Manager) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

SAP Overview Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Physical Flow What is the trigger? What are the steps? What is the purpose of each step? Who is involved in each step? How is communication and coordination accomplished Magal and Word | Essentials of Business Processes and Information Systems | © 2009

Procurement Process: Physical Flow Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Document flow Purchase Requisition Purchase Order Packing List Goods Receipt Document Vendor Invoice and Payment Key questions regarding documents What is the purpose? What are the key data? General: Who, when, what, where Process / step specific: varies How does data change across the process? Who is responsible for the data? Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Purchase Requisition Filled later by the purchasing department, based on the purchase order form. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Purchase Order Materials may be shipped via ground shipment (trucs, etc.), air, train, sea. Free-on-board (F.O.B ) point is the point at which ownership of the shipped material legally transfers from one company to the other. F.O.B. Point is either the shipping point or the destination. Payment Terms define how the company will pay the vendor. Net nn: nn specifies the number of days within which payment for the full amount of the invoice is due. x% mm/Net nn: x% discount is made if the payment is made within mm days; otherwise, full payment should be made within nn days. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Packing List When the vendor sends the shipment, a packing list or delivery document will accompany it, showing the details about the materials in the shipment. It does not include pricing information. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

A Goods Receipt Document Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

A Vendor Invoice Once the shipment is sent, the vendor will send an invoice, or bill for the material shipped to the accounting department for payment. Three-way match: The corresponding purchase order document, goods receipt document and invoice are matched. If the match is OK, the payment is made by check or Electronic funds transfer (EFT) Note of the Accounting Manager after the payment is made: Paid in full Check # 25846 8/1/08 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Information Flow Instance-Level Information Process-Level Information Status of a purchase requisition / order Has a requisition been acted on? Has a PO been created and sent Have goods been received for the requisition / order? When? Where are the goods? If received, has an invoice been received? Paid? If not received, when can we expect the goods? Ex: David wants to know the state of the purchase requisition he sent to Martha Process-Level Information How well is the process doing? How much time does it take on average? Per material? Per vendor? Which vendors are prompt? Who habitually delivers late? What do we buy most often? From with vendor(s)? Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Financial Impact Impact on balance sheet and income statement accounts Example: Procure $500 in materials. Process step B/S I/S Purchase requisition Purchase order Goods receipt Vendor Invoice receipt Vendor payment Magal and Word | Essentials of Business Processes and Information Systems | © 2009

Role of enterprise systems in the procurement process Execute the Process Create Purchase Requisition Create Purchase Order Receive Shipment Receive Invoice and Send Payment Capture and Store Process Data Monitor the Process Instance-Level Information Flow Process-Level Information Flow Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Enterprise systems in Procurement Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Purchase Requisition in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Purchase Order in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Goods Receipt in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Invoice Receipt in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Vendor Payment in SAP – Initial Screen Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Vendor Payment in SAP – Processing Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Process monitoring (Information flow) Instance level – status information Status of a purchase requisition / order (PO history) Process level – aggregate information How is the process doing? Magal and Word | Essentials of Business Processes and Information Systems | © 2009

Purchase Requisition History Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Purchase Order History Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Process-Level Information Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

Exercise Using Simulated SAP The exercises will require you to complete the steps in the procurement process that have been discussed in this chapter. In particular you will: Create a purchase requisition for a number of trading goods Convert the requisition to a purchase order Enter a goods receipt into the system Enter a vendor invoice into the system Record a payment to the vendor Magal and Word ! Essentials of Business Processes and Information Systems | © 2009