Supporting the Procurement Process with SAP Chapter 7 Supporting the Procurement Process with SAP Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives Q1. What are the fundamentals of a Procurement process? Q2. How did the Procurement process at CBI work before SAP? Q3. What were the problems with the Procurement process before SAP? Q4. How does CBI implement SAP? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Learning Objectives Q5. How does the Procurement process work at CBI after SAP? Q6. How can SAP improve the integration of supply chain processes at CBI? Q7. How does the use of SAP change CBI? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What are the fundamentals of a procurement process? Three activities Order; Receive; Pay Figure 7-1 Main Procurement Process Activities and Roles Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What are the fundamentals of a procurement process? Supporting the Inbound Logistics Process in the Value Chain Procurement of raw materials needed for production Figure 7-2 Procurement Process within the Value Chain of CBI Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What are the fundamentals of a procurement process? Linking the fundamentals of the procurement process with Inbound Logistics in the Value Chain Figure 7-4 Main Procurement Process Activities, Sub Activities, Production Process and Inventories Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How did the Procurement process at CBI work before SAP? Six Roles Two roles performed by people Warehouse Manager and Accountant Four roles performed by separate computer applications with separate databases (DB) Sales DB; Purchase Order DB; Warehouse DB; and Accounting DB Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How did the Procurement process at CBI work before SAP? Information Systems Silos Sales DB: Monitor demand for materials Purchase Order DB: Manage purchase order information Warehouse Database: Manage inventory levels Accounting DB: Manage payables Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How did the Procurement process at CBI work before SAP? CBI’s Procurement process Involved several roles Resulted in information silos Inefficiencies Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What were the problems with the Procurement process before SAP? Warehouse Problems Accounting Problems Purchasing Problems Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What were the problems with the Procurement process before SAP? Warehouse problems: Growth in finished goods inventory Limited space for raw materials Lack of visibility into price discounts Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What were the problems with the Procurement process before SAP? Accounting problems: Three-way match for payment was a challenge Correcting discrepancies were labor intensive Time delays in updating accounting data Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What were the problems with the Procurement process before SAP? Purchasing problems: Purchasing wasn’t centralized Inexperienced users Errors in data entry Pressure for greater financial controls Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

What were the problems with the Procurement process before SAP? ERP Provides solutions to CBI’s problems CBI selects SAP to provide ERP solutions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does CBI implement SAP? CBI had to reexamine and refocus their strategy Involved three activities Determine industry structure Commit to a specific competitive strategy Develop objectives and measures for processes Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does CBI implement SAP? Determine industry structure Porter’s Five Forces Strong rivalry with low switching costs FIGURE 7-9 Determine Industry Structure with Five Forces Model Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does CBI implement SAP? Commit to a specific competitive strategy Differentiation strategy of responsiveness Focus on high end bikes FIGURE 7-10 Four Competitive Strategy Options and CBI’s Competitive Strategy Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does CBI implement SAP? Develop objectives and measures for processes Supported by an IS consulting firm FIGURE 7-11 Objectives and Measures for the New Procurement Process Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does CBI implement SAP? Clear approach to implementing SAP Found their position in their industry Defined a competitive strategy Created objectives and measures for their processes Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Maintained same three major activities Order; Receive; and Pay Single shared database Solutions to prior problems Purchasing Warehouse Accounting Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Purchasing New purchasing department centralized purchasing activities Data entered in a single, shared database Automated internal company document Purchase Requisition (PR) Easy conversion of PR’s to Purchase Orders Reduces errors Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 8/22/2011 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Purchasing FIGURE 7-13 Purchase Order Screen in SAP for 20 Water Bottles and 30 Water Bottle Cages from Space Bike Composites Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Purchasing Process—Context Diagram 8/22/2011 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Purchasing Process—Level 0 Diagram 8/22/2011 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Sample Purchase Order Screen 8/22/2011 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Warehouse Goods receipts entered into same database as PO’s SAP verifies the goods received against the PO Immediate update to inventory Accounting impacts automatically updated in the same database SAP documents this in the database Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Goods Receipt FIGURE 7-14 Goods Receipt Screen in SAP Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Accounting Three-way match completed by SAP Less labor intensive Incoming invoices are compared to PO and Goods Receipt for verification Payment simplified Accounting updated automatically in SAP SAP documents these steps in the database Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Invoice Three-Way Match FIGURE 7-15 Enter Incoming Invoice Screen in SAP Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Payment FIGURE 7-16 Post Outgoing Payments Screen in SAP Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Procurement process work at CBI after SAP? Benefits of SAP for CBI’s procurement process Single database Shared information in real time Reduction of errors Improved financial controls Increased responsiveness Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Supply Chain Process Integration Improving Supply Chain Process Integration by Sharing Data Improving Supply Chain Process Integration by Increasing Process Synergy Other IS That Improve Supply Chain Processes Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Supplier Relationship Management (SRM) Returns Management Supplier Evaluation FIGURE 7-17 Sample of Supply Chain Processes Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Supply Chain Process Integration Supply Chain Management (SCM) Tools, techniques, and management activities Integrates across supply chain processes Supports organizational strategies Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Improving Supply Chain Process Integration by Sharing Data process integration improves with sharing data FIGURE 7-18 Examples of Process Integration by Sharing Data Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Improving Supply Chain Process Integration by Increasing Process Synergy Processes are mutually supportive FIGURE 7-19 Examples of Process Integration by Process Synergy Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Other IS That Improve Supply Chain Processes Augmented reality RFID Sensors Robotics 3D printing Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How can SAP Improve the Integration of Supply Chain Processes at CBI? Sharing Data Increasing Process Synergy Other IS That Improve Supply Chain Processes Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How does the Use of SAP Change CBI? New skills are needed Process focus More data sharing Outsourcing Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Ethics Guide Procurement Ethics “Buy-In” External sourcing In-house procurement Discussion Questions Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Conclusions Q1. What are the fundamentals of a Procurement process? Q2. How did the Procurement process at CBI work before SAP? Q3. What were the problems with the Procurement process before SAP? Q4. How does CBI implement SAP? Q5. How does the Procurement process work at CBI after SAP? Q6. How can SAP improve the integration of supply chain processes at CBI? Q7. How does the use of SAP change CBI? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall