1. Concepts in Enterprise Resource Planning 2 nd Edition Chapter 1 Business Functions, Processes, and Data Requirements

2. 2 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

3. 3 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.

4. 4 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.

5. 5 Functional areas of operation Marketing and Sales Production and Materials Management (SCM) Accounting and Finance Human Resources

6. 6 Business Processes Managers now think in terms of business process Take the customer’s perspective

7. 7 Your first business enterprise…

8. 8 Think in terms of business processes… What are the processes involved in running a lemonade stand? Assume one person Assume cash business InputsOutputsProcess

9. 9 Sample Lemonade Processes Get OK From Mom Get supplies together Get OK From Mom Make lemonade Make Sign(s) Choose location Make lemonade Make lemonade Set up table Rake in The cash

10. 10 Sample Lemonade Processes Get OK From Mom Get supplies together Get OK From Mom Make lemonade Make Sign(s) Choose location Make lemonade Make lemonade Set up table Rake in The cash Is it feasible? What supplies do I need? How much do we make? How much to charge? Who are my customers? Is it worth continuing?

11. 11 Your enterprise partners… Customers Mom/Dad Grocery Friends

12. 12 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?

13. 13 Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

14. 14 Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

15. 15 Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

16. 16 Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

17. 17 Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics

18. 18 Functional Silo View of an Organization Sales Accounting Purchasing Production Logistics Information?

19. 19 Cross-Functional Nature of the Order Management Process QuoteCommitProduce Check Credit DeliverBillCollect

20. 20 Cross-Functional Nature of the Order Management Process QuoteCommitProduce Check Credit DeliverBillCollect Sales & Distribution Production Planning Financial Accounting Materials Mgmt

21. 21 Cross-Functional Nature of the Order Management Process QuoteCommitProduce Check Credit DeliverBillCollect Sales & Distribution Production Planning Financial Accounting Materials Mgmt

22. 22 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.

23. 23 Functional Areas of Operation

24. 24 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

25. 25 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

26. 26 Process View of Business Sales Function Accounting Function Purchasing Function Production Function Logistics Function Material Order Process Customer Order Process Figure 1-3 A process view of business

27. 27 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

28. 28 Another Look—Nova Chemicals According to John Wheeler, CIO of Nova Chemicals, changing from a function-oriented view to a process- oriented is a complicated process Business processes include: People with particular skill sets Information Tools Correct organizational culture

29. 29 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

30. 30 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

31. 31 Lemonade Stand Functional Areas Supply Chain Management Buying raw materials (purchasing) Making lemonade Manage recipe Maintain manufacturing (cost) records

32. 32 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

33. 33 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

34. 34 Functional Area Information Systems

35. 35 Marketing and Sales Inputs Customer data Order data Sales trend data Per-unit cost Outputs Sales strategies Product pricing

36. 36 Functional Area Information Systems

37. 37 Supply Chain Management Inputs Product sales data Production plans Inventory levels Outputs Raw material orders Packaging orders Resource expenditure data Production and inventory reports

38. 38 Functional Area Information Systems

39. 39 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

40. 40 Functional Area Information Systems

41. 41 Human Resources Inputs Personnel forecasts Skills data Outputs Regulation compliance Employee training and certification Skills database

42. 42 Why implement ERP? Technological reasons Business reasons

43. 43 Other Organizations implemented ERP for these Technology Reasons 6 11 12 19 26 37 42 Y2K unable to support growth obsolete systems difficulty integrating acquisitions systems not integrated poor quality of information disparate systems

44. 44 Common Business Reasons for implementing ERP 10 15 20 21 24 27 poor performance inconsistent business processes globalization unable to support strategies complex processes not responsive to customers high costs

45. 45 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

46. 46 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

47. 47 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

48. 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

49. Name That Module... R/3 Client / Server ABAP/4 FIFinancialAccounting COControlling AM Fixed Assets Mgmt. PSProjectSystem WFWorkflow ISIndustrySolutions MMMaterialsMgmt. HRHumanResources SD Sales & Distribution PPProductionPlanning QMQuality Manage- ment PM Plant Main- tenance Integrated solutions Open systems Client / server architecture Enterprise data model Designed for all types of business Multinational Comprehensive functionality

50. 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

51. 51 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.

52. 52 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.

53. 53 Summary Functional areas are served by information systems, which capture, process, and store data to provide information needed for decision making.

54. 54 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.

55. 55 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.