chapter 7 - enhancing business processes using … · with business partners chapter 7 - enhancing...

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Enterprise systems integrate business activities across the organization and

with business partners

Chapter 7 - Enhancing Business Processes Using Enterprise Information Systems


Chapter 7 Learning Objectives

Core Business Processes and Organizational Value Chains

• Explain core business processes that are common in organizations.

Enterprise Systems

• Describe what enterprise systems are and how they have evolved.

Enterprise Resource Planning

• Describe enterprise resource planning systems and how they help to improve internal business processes.

The Formula for Enterprise System Success

• Understand and utilize the keys to successfully implementing enterprise systems.




Explain core business processes that are common in organizations.

Enterprise Systems

Describe what enterprise systems are and how they have evolved.


Describe enterprise resource planning systems and how they help to improve internal business processes.


Understand and utilize the keys to successfully implementing enterprise systems.


Scenario

• You work for a mid-sized manufacturer of supplies for white boards.

• Working in groups of 3…each of you will take responsibility for:

– Inbound Logistics/Procurement

– Operations/Manufacturing

– Outbound logistics/Order Fulfillment

• What information do you need to make your team efficient and effective?


Scenario (cont.)

• What types of information needs to flow from one team to the next to make the organization efficient and effective?

• How do we facilitate this flow of information from one system to the next?


Scenario (cont.)

• What type of information flows between teams within your organization & what type of information flows between your organization and your business partners (suppliers & customers)?


Core Business Processes

• Traditional business functions: – Marketing and sales

– Supply chain management

– Accounting and finance

– Human resources

• Not distinct independent silos, but instead highly interrelated

• Business processes cross boundaries of business functions.


Break the class up into 4 groups


Order-to-Cash Process

• The processes associated with selling a product or service


Procure-to-Pay Process

• The processes associated with procuring goods from external vendors


Make-to-Stock / Make-to-Order Process

• The processes associated with producing goods

Who has worked at a place that used Make-to-Stock?

Who has worked at a place that used Make-to-Order?


Supply Chain

• Core business processes enable the creation of supply chains.

• Resembles a river – Start at source

– Move downstream


Value Chain

• Value Chain—The set of business activities that add value to the end product.

• Information flows through a set of business activities.

– Core activities—functional areas that process inputs and produce outputs.

– Support activities—enable core activities to take place.


Value Chain Framework


Externally Focused Applications—Value System

• Coordination of organizational value chains

• Information Flows in a Value System – Upstream information flow—information received from another company

– Downstream information flow—information produced by a company and sent to another organization


Enterprise Systems



Enterprise Systems







The Rise of Enterprise Systems

• Stand-alone applications – Not designed to communicate with other system – Variety of computing hardware platforms – Enable departments to conduct daily business activities

– Not helpful for other areas in the firm

• Proprietary systems – From vendors – Not designed to share with other vendors’ systems – Problem of knitting together (hodgepodge portfolio of

discordant proprietary applications) – Lack of integration


Legacy Systems

• Each department has its own system.

Infrastructure specific

Inefficient processes

Potential for inaccuracies

Too many “rocks in the river”


Enterprise System Approach

• Integrated suite of business applications for virtually every department, process, and industry


ERP Challenges

• What are some of the challenges with implementing an ERP?

• Why would a company want to do this?

• Who might resist? Why?


Lo

cation

Co

des

Shi

pmen

t C

osts

Invo

ices

Freight A/P Invoices/Fixed Asset Account Balances

Sales Data

Prism

Productio

n Schedule

s, Short

Term

MPP's

, Batc

h Siz

es, Cycle

Tim

e, Costs

and E

quipm

ent

Variance File, Grid File

Financial Issues

Order Level Data

Product Sourcing, C

ustomer Orders and Historic

al Order In

fo

Protea

n

Master Vendor Fields, Work Orders,

S+O

P

Forecasts, Supply Plan

Shipment History, Customer Orders,Inventory/ Replenishment Orders

Historical S

ales Data and M

anufacturing Costs

Busine

ss

Applica

tion

Ho

me

Gro

wn

Ap

plic

atio

ns

Singa

pore

Custom Orders Are EDI to Logistic Suppiler

Chin

a

Goverment In

voicing Cycle System

APR

CCH

S

Order Detail

OTIF

Business P

olicies R

eporting

GOOD

Daily C

ustomer Service In

formatio

n/All A

PR and LAR Ord

ers

Order D

ata/NAR and E

R Ord

ers

WWB

OM

Pro

du

ction

Mo

del U

saages, O

ver Head

Co

sts, R &

M C

on

tainer P

rices, Pu

rchase P

rices

DFIA

MI

MS

TW

S

Com

ponents of

Product C

osts

Ship Rates

Currency

Exchange Rates

Inventories

CS

Rs D

uring Month-end R

uns

Billing

Inform

ation

New Billing Documents/Customer M

onetary Adjustrments/Invoice Data

Global SACOS

A/R Invoices and Cost of Sales Balances

ODS

Data Extracted from Orders and

Shipments

Exter

nal

Data

Inter

nal

Data

User

Moves the Inventory from Produced to Consumed/Shipments

Path

Extrac

ts

Pat

h E

xtra

ct T

able

Info

, P

O's

, an

d It

em D

escr

ipti

ion

PCA

PC

A D

ata

Customers Orders Entered Manualy

Forecast Costs

Busin

ess

Plan

Yea

rly

Bus

ines

s Pla

n

Fo

recast Data

Busine

sses

Tolera

nce

LimitsBusin

ess Pla

n InfoMaintained by

Businesses

Buisne

ss

Finacia

l

Datam

art

Gross Volume Sold

Morton Standard Costs, Class 10 Production Transactions

Bu

sin

ess

Fin

anci

als

Data about Batches Tested in the Lab, Finished Packages Inventory

Lab

Resu

lts

COA

Man

ual

ly E

nte

red

Lab

Res

ult

s

Ord

er a

nd C

usto

mer

Info

rmat

ion

LOA

MM

ain

ten

ance

of

CO

A F

orm

ats

BPC

S

Class 10 P

rod

uctio

n T

ransactio

ns/ F

inish

ed

Go

od

s

Co

rpo

rate

Co

nst

ants

/Pro

fit

and

Co

st R

epo

rts

Mitro

lStandard

Costs

Invoices for ERS

CDR

OM

1 yr. Invo

ice Detail

Ord

er Pro

cessing

Deliv

ers O

rder

s to

be

Packe

d and S

hipped

/ Pla

nting S

ched

uling fo

r Ord

er D

ata

Asp

en

Plant P

roduction and Consum

ption

Formated Transactions

Formated Transactions, Payment Vouchers

Procurement Visa/ Procard Survey

A/P

Workfl

ow

Invo

ices

Scan

Stati

ons

Index

ing

Invo

ices

Ind

exed In

voices

Data Validation

Financial Data

Shipely Data

Contra

cts

Buyers T

able

Mainten

ance

Metrics

Entity

Costs

Flow

Hierar

chy

Report

s

Operati

onal

Report

s

Cry

stal

Rep

orts

Ou

tpu

t ca

n b

e to

Scr

een

, File

,

Pri

nte

r

Outp

ut to S

cree

n, File

, Prin

ter

Output to Screen , F

ile, P

rinter

ERS

Invoic

es

Invo

ices

RFE

Rec

eipt

s

Reference Data

Corporate Level Information

Price In

fo fo

r NA

R an

d E

R B

usin

ess Team

sTransf

er

Price

Data

US

Dome

stic

Billing

Sys

tem

Con

trol

File

s

Order Entry Data, Product Info, Container Info, Customer Info, US Invoices

Note

s

File

Notes on Ship to Inro

Co

rpo

rate Level In

form

ation

Feeds the SACOS

Pana

gonHistorical Invoice System

Paper

Invoic

es

End Custom

er Invoices

Data fo

r Trad

ing

Partn

ers

Ord

er D

ata

Global

Logisi

tics

Global Logistics D

atamart

Asset

Utiliza

tion

End of P

eriod Monthly Files/

TDC

,MD

PR

Acce

ss

Linked Tables

Branch

Wareh

ouse

Invento

ry

Sys

Fla

t File

s B

atch

Jobs

and ID

MS

Dat

abas

e

Histo

rical Data, C

ost C

enter R

eference D

ata/Up

date B

ud

get L

edg

ers, Plan

t Allo

cated C

osts

Plant Allocated Costs

Excel

l

Sp

read S

heet D

ata

OASI

S

Up

dat

ed B

ud

get

Am

ou

nts

Budge

t

Manag

ers

Direc

t Bud

get A

mou

nts

TWS

FRP

DFIA

HR/

Payr

oll

MSA

Actual

Expen

ses

Busines

s

Plan &

Monthly

Actuals

Fringe, LTI Rates

Location Code/Names, Business

Code/Names

Bonus D

ata

Dep

riciation

Data

User

InputInput is Keyed into the System asNeeded

Business Data

Business Data

Accounts Receivable/ Time Drafts, Unshipped Orders Summarized at a Remitt Level

Cas

h

Bank Transmissioins

Transfe

r Pric

ing In

fo

Server

Datab

ase

Ad

ho

c Qu

eriesKub

ra

Canadi

an

Sales

System

Invoices

CMD

B

Production Reporting

Manu

el

Input

Corpor

ate

Consta

nts

Reference Data

Cost

s

Mitro

l

Standard C

osts

Customer Data/Order Information

Custo

mer

Servic

e

Ord

er D

ata

Cycle

Count

Tool

Inventory is Calculated Based on Pattern or Process

Repo

rts

Custo

mer

Service

Report

s

Foc

us

Online

Applica

tion

Mida

s

Major Customer In

fo

Business C

ontact Info

Majo

r Cu

stom

er Info

Account Maintenance

Customer Hierarchy Info

Daily

Billin

gs

Daily

Cost

s

Sta

nd

ard

Co

sts

Standard Costs of Productio

n

Sta

ndar

d R

& H

Cos

ts

Dimen

sion

Mart

Export

Billing

Syste

m

Co

rpo

rate Data

Order Entry Data to Build the Export Invoice

Electronic D

ata For the Freight Forwarder

Billin

g Info

rmatio

n

INVC

Custo

ms

Paper

work

Paper

Invoic

es

Paper Work to Clear Customs

Custom

er Invoices

Focus

Pivot

Table

Foreign

Sales

Corpora

te

Tax

SACO

S

FCM

S

Orders are W

ritten to File

Freig

ht Rate

s, Fre

ight T

arrifs

, Sta

ndard S

urcharg

es

Info

About

Carrier

s

Adddit

onal

Surcha

rges

Sta

nd

ard

Mai

nte

nan

ce

Manually C

ase by

Case

Freight

Costs

Statem

ents

List of Freight Costs

Cost of Transportation by Product/ Customer

Process

Perform

ance

Qu

eries

Ord

er D

ata

Freig

ht

Rate

s

Freig

ht Bills

and Ship

ping

Data

Sh

ipm

ent D

ata

Fre

igh

t B

ills

Manu

el

Entry

Frei

ght B

ills,

Tar

iffs

Dslsct

ytd

Essb

ase

DslsC

osts

Dimensio

n and D

ata F

iles fo

r Sale

sview

Model

Freight Costs

Cost Information

Perio

d C

ost an

d V

ariance C

ost

Monthly Sales File

DCD

A

DCD

F

APR

Cu

sto

mer

Dat

a

Market Directory

Monthly Sales Files

Provides all C

orpora

te Constants

Freigh

t

Rates

Freight Bills

Shipment Data

ATTA

K

GE

Inform

ation

Extran

et

Geon

Interlin

king

PO C

hange

Notic

es

Ord

ers,

PO

As,

ASM

s, In

voic

es

Dema

nd

Planni

ng

Tool

Fo

reca

st In

fo

Hyperi

on

Fina

ncia

l Mod

els

Ledge

r

Accou

nts

Direct In

put of D

ata

Info

Servi

ce

Corporate Constants Reference Information

Dat

a fr

om

IDM

S T

able

Files

Web

Trends

Reporti

ng

Static

HTM

L and E

xcel Reports

Sams

onWeb Trends Reports

Tax

Dat

a

Prop

ertyFixed Property Data

Sal

es

Payr

oll

Payro

ll Data

Orders Inventory, Shipment History

Orders and Inventories

Integr

ated

Costs

Stan

dard

Costs o

f Pro

ducts

Intra

com

Bill

ing

Do

cum

ents

Declarat

ions

Invoice

Archivi

ng &

Retriev

al

CDRO

M

ER

IN B

urn

t on

to a C

DR

OM

ERIN

Yearly H

istorical In

voice D

ata

Italian

Traini

ng

Syste

m

Traini

ng

(Intern

al)

Train

ing

Sessio

ns

Sessio

n

Form

Person

al

Trainin

g

Form

Use

rs P

erso

nal

Tra

inin

g H

isto

ry

Fo

rm D

escribin

g a S

pecific T

rainin

g

Sessio

n

Balance Records

M1 Reports

Freig

ht

Invoi

ce

Constru

ction

Expens

e

Paid

Vouch

er

Detail

Financi

al

M1

Report

Banks

Sal

es F

reig

ht

Co

sts

Co

nst

ruct

ion

Co

sts

Balance Records

Pai

d V

ou

cher

Info

M1

Rep

ort

s

Pay

men

t Det

ail

Brazili

an

Bank

File

Pai

d A

/P V

ou

cher

, an

d A

/R In

voic

e D

etai

l

Payroll

System

s

Mars

h

Pay

roll

Acc

ou

nt B

alan

ces

Fix

ed A

sset

Acc

ou

nt B

alan

ces

Budget

Appllica

tion

An

nu

al B

ud

get

Am

ou

nts

Customer Receipts

Stand

ards

Keywo

rds

Keywo

rd

Searc

h

Man

ufactu

ring

Stan

dard

s

Ass

oci

ated

Wo

rds

Global

Shipp

ment

Info

Order S

hipment Inform

ation

LIF

OInventory Vaules

Transmi

ssion

Files

Quantity and Value by Location

Lion

Operato

rs

&

Secretar

ies

Ro

om

Reservatio

ns/ O

n D

eman

d

Bad

ges

Badg

e

Confer

ence

Room

Vis

tor

Bad

ges

Lists o

f Bo

oked

Ro

om

s

Logi

plan

Monthly S

tatis

tics, D

aily P

lanning R

eport

Resources Parameters File, Procurement Orders, Planning File, Merge Orders

Mast

er

Data

e-

busine

ss EDI Forecasts

Date/

Time

Mariti

me

Carrier

Contai

ner

Type

Order

Numb

er

Locati

on

Destin

ation

Port

LPSCAg

Man

ual In

pu

t Man

ual

In

pu

tMan

ual In

pu

t Man

ual

Inp

ut

Manual Input M

anua

l Inp

ut

Lo

ad P

lann

ing

per L

ocatio

n

Manage

r

Applica

tion

Lo

ng

Ter

m P

rod

uct

ion

Pla

ns

Fo

recasts, Su

pp

ly Plan

Shipment History, Customer Orders, Inventory

Released Orders, Short Term Production Plans

Busines

s

Applicat

ions

Mast

er

Data

All

Dat

a F

rom

LIC

ON

S

EDI, Forecasts

Market

Direct

ory

Daily File from NAR/Actual M

arkets and Accounts

Mar

ket D

irec

tory

Info

fro

m A

PR

an

d L

AR

Daily Customer/Product T

ransaction File/Market D

irectory Adjustm

ents

Data Aligned Daily, Actual M

arkets and Accounts

SBU D

ata

and Act

ual M

arke

ts a

nd Acc

ount

CC

HS

Mexic

an

Payme

nts

Corporate Code References

Tran

spo

rtation

Rates

Carrier Modes

Mono

mers

Cu

sto

mer

Ord

ers

and

Inve

nto

ry

Tax

Fin

ancial D

ata

Tax

Pur

pose

s an

d R

epor

ting

Operati

onal

Report

s

Val

idat

e D

ata

En

try

TSX

Used

for T

ax Pu

rpo

ses

Data A

dded to the Application

User

Impo

rts

Data

Service/

Area

Identific

ation

Comm

ents

Author

Identific

ation

Product

Identific

ation

NC-

ACP

Metri

cs

List o

f All F

iles

Referen

ce of th

e Service o

f the A

uth

or

Reco

rd o

f the A

ctiion

/An

alysis

taken b

y the A

uth

or

Lo

go

n o

f th

e P

eop

le w

ho

Inp

ut

Iden

tifi

cati

on

An

y R

efer

ence

: Pro

du

ct C

od

ing

,

Bat

ch N

um

ber

...

Office

Svs

Syste

m

OFP

Mont

hly

Sh

ipm

ent

Info

rmat

ion

Datam

art

Glo

bal L

og

istics

Data

Inbound/Outbound Data

ER, NAR Data

Hazard Info on Products/Customer Data/Logistics Data/Carrie

r Data

Freight Rates/Carrier Routings and Transit Times

Qu

alit

y C

on

tro

l In

form

atio

n

Invo

ice Level D

ata

QCS

CGII

No

Lo

ng

er Su

pp

orted

By O

PIM

Inb

ou

nd

Electro

nic D

ata Exch

ang

e

Historical O

rder Data (3yr. R

etention)

ORDILab

eling S

ystem

Order Level D

ata

MCM

S

Plan

Sch

edu

ling

SRC

E

So

urce In

form

ation

for S

hip

pin

g P

rod

uct

Qu

alit

y C

on

tro

l Sys

tem

Corporate Level Data

INVC ERIN

Exp

ort In

voice D

ata

Eu

rop

ean In

voices

KMC

Knoxv

ille

Pla

nt

Sch

edu

ling

Pac

kag

e fo

r O

rder

Dat

a

Order

Commit

ment

Tool

IPT

and

IBT

Ord

ers/Dem

and

Data

Test

Res

ults

Plant

Quali

ty

Contr

ol

Job

Up

dat

es

PPQ

M

Seq

uen

tial

File

s

PRD

B

Man

ufa

ctin

g S

ub

ject

Are

a

Pricing In

formatio

n from th

e Web

Pricin

g

Focus

Datab

ase

Operati

onal

Pricing

Reports

Pri

ce U

pd

ates

Pricing Information

User

Input

Bristol

Polyme

rs

Proces

s

Control

Rep

ort

Mo

no

mer

Co

nsu

mp

tio

n

Entity

Templ

ates

Manually Entered Templates

Regulat

ory

Informat

ion

Mainten

ance

Work

Process

Test Codes, Test Specifications, Test Results, Product Specifications

Quality Control Data

RCM

S

Order Data

Order Status Info

Order S

hipm

ent Data

Rail

Carri

ers

Car Locatio

n Messages

Operati

onal

Report

s

Rep

orts U

sed to

Track

Sh

ipm

ents

VSA

M

Files C

on

tainin

g V

ehicle ID

's

Estim

ated Arrival D

ates

Routi

ng

Data Updates, Order Entries

Shipm

ents

Daily

Ord

er and S

hipm

ent Data

Global Logistics and B

usiness Financials

Static

Global

Deman

d

Sheets

Static

Regio

nal

Dema

nd

Sheet

s

Supply/

Line

Order

Pad

FTPs File

FTPs

File

Freight Payments to Carriers

Training

Manage

ment

System

Report

s

(up-to

65)

Input File

Ref

eren

ce In

form

atio

n

Suppl

y

Chain

s

SBU's

Maps V

ariance Data to

Proper U

ser

Excel

l

Cu

sto

m Q

uer

ies

Webtre

nds

Reporti

ng

Word

Docu

ment

Web

Tren

ds

XRefere

nces

SK

Us

Cro

ss R

efer

ence

s

Referen

ce Tab

le/Pro

vides a L

ink b

etween

Mo

rton

Co

de S

tructu

res and

Cu

stom

er Levels, S

ales, Co

sts and

Pro

fits

Fo

rmat

ted

Dis

bu

rsem

ents

Product Test Results

Data fr

om D

B2 Data

base

DAZ

EL

Fax/em

ail Co

pies

Tote

max

Ord

er D

ata

Manu

el

Tote Details/Status

Car

rier

Co

ntr

acts

Customer O

rder a

nd Assignment S

hipments, SKU's, P

roductio

n and Consumptio

n, Invento

ry R

elocations, P

roduct R

eclassificatio

ns, IPT re

ceipts, Receipts of U

nfinished G

oods, Inventro

y Transactio

n

BO

Ms,

Rel

ease

d O

rder

s/Th

ird

Par

ty P

urch

ase

Ord

ers,

Cla

ss 1

0 Pla

nnin

g Pro

duct

ion

Ord

ers,

Dem

and

to D

ata

Ord

ers,

Fore

cast

Con

sum

ptio

n, L

ong

Term

Pro

duct

ion

Plans

SKU Descrip

tion/ N

et Fore

casts fo

r SKUs

Invoice, Cash, A/R Movement

Transf

er

Price

File

Pricing Data for IPT's

Exc

ell

A/R Invoices, Matched Payment Vouchers, Manufacturing Account Balances/Direct Cost Budget Detail, Direct Cost Actual Detail, Currency Exchange Rates, Invoice Payments, Costs, Allocated Overhead Costs

Plant Budget

Pro

fit and

Co

st Rep

orts, P

rod

uctio

n R

eference D

ata/Bu

siness D

ata

Market P

roduct Info

Salt

Customer Data

ATTA

K

Sales D

ata for P

lastic Ad

ditives

M62

M26

Order Data OnlyPurchase Data Only

Order

s/

Shipm

ents

Compl

aints

Custom

er

Complai

nt

Handlin

g

System

Up

dated

Ord

er File

Man

ual

ly E

nte

red

th

rou

gh

Web

Focus Pivot Points

MSA

Fixed

Assets

e-

Comme

rce

Invoic

e

Archiv

al

Proce

ss

Plex

New

Ro

hm

and

Haas O

rgan

ization

Stru

cture In

fo

Current State

System MapPrici

ng

Pro

duct

Sourc

ing/R

elea

sed O

rder

s/S

hor

t Ter

m

Pro

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• Who are the largest and most influential ERP vendors?


Supporting Business Processes

• Internally focused systems


Supporting Business Processes

• Externally focused systems (interorganizational systems)


Modules of Enterprise Systems

• Each module in an enterprise system replaces a stand-alone legacy system.


Vanilla Versus Customized Software

• Vanilla version – This version contains features and modules that an

enterprise system comes with out of the box.

– Certain processes might not be supported.

• Customization – This version contains additional software or changes to

vanilla version.

– It always needs to be updated with new versions of vanilla.


Capabilities of SAP’s ERP System


Best Practices-Based Software

• Most ERP vendors build best practices into their ERP systems.

– Identify business processes in need of change

– Future updates are smoother if businesses change their business processes to fit with ERP systems.

• Is following the best practices always the best strategy?

– If companies have competitive advantage from unique business processes, forcing best practices may actually hurt.





Enterprise Systems







Enterprise Resource Planning (ERP) Systems

• Enterprise Resource Planning—Applications that integrate business activities across departmental boundaries.

• ERP evolved during the 1990s from material/manufacturing requirements planning packages.

• Emphasis has since shifted from “resources” and “planning” to “enterprise.”

• Integrate legacy information on a company-wide basis


Integrating Data to Integrate Applications

• Central information repository

– ERP replaces stand-alone applications

– Modules based on

• Common database

• Similar application interfaces


Example ERP Screen

• An ERP system can provide employees with relevant, up-to-date information.


Core and Extended ERP Components

• Core components—support primary internal activities.

• Extended components—support primary external activities.


ERP Core Components

• Financial Management – accounting, financial reporting, performance

management, corporate governance

• Operations Management – simplify, standardize, and automate business processes

for inbound/outbound logistics, product development, manufacturing, sales and service

• Human Resource Management – employee recruitment, assignment tracking,

performance reviews, payroll, regulatory requirements


Human Resources Management


Order-to-Cash


Procure-to-Pay


Production


ERP Installation

• Configuration of the ERP systems is performed during any ERP implementation.

• System must be configured to reflect business processes and associated business rules.

• Organizations have to make countless decisions on how to configure thousands of database tables to fit the business’s needs.

• Organizations hire experienced business analysts or outside consultants to assist with implementation.


ERP Limitations

• ERP falls short in communicating across organizational boundaries.

• They tend to be not well suited for managing value system activities.

• Other systems can work with ERP to provide these capabilities.





Enterprise Systems








1. Secure executive sponsorship . – Most failures are due to lack of top-level management support.

2. Get help from outside experts. – Consultants are specifically trained. – Implementation tends to happen faster.

3. Thoroughly train users. – Training is the most overlooked, underestimated, and poorly

budgeted expense. – Training can prevent dissatisfaction.

4. Take a multidisciplinary approach to implementations. – Include end users from all functional areas in the

implementation.

5. Initiate evolving the ERP Architecture.