DM104 – Evaluation of Business Performance Page 1 of 14

ERP, Financials, Sales, and Supply Chain

ERP, FINANCIALS, SALES, AND SUPPLY CHAIN

• Enterprise Resource Planning (ERP)
• Finance and Sales
• Supply Chain

Welcome Notes:
WELCOME BSIS STUDENTS!

I. INTRODUCTION:

This module discusses the enterprise resource planning (ERP) systems that are now commonly used by
large companies to support supply and demand planning and control. The integrated enterprise resource
planning (ERP) systems that are now commonly used by large companies to support supply and demand
planning and control.

II. OBJECTIVES:

At the end of this module, you should be able to:

1. Define Enterprise Resource Planning (ERP) system.
2. Illustrate how supply chain planning and control fits within ERP.
3. Differentiate finance, sales, and human resource.
4. Discuss supply chain management.
5. Identify the different supply chain models.
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ERP, Financials, Sales, and Supply Chain

III. PRELIMINARY ACTIVITIES:

Before you proceed to the main lesson, test yourself in this activity.

Direction: Write TRUE if the statement is correct, otherwise write FALSE.

_______ 1. ERP stands for Enterprise Resource Programming.
_______ 2. ERP is an application that automates business processes, and provides insights and internal
controls.
_______ 3. Sales is a term broadly describing the study and system of money, investments, and
other financial instruments.
_______ 4. Finance is an activity related to selling or the number of goods sold in a given targeted time
period.
_______ 5. Supply chain is the network of all the individuals, organizations, resources, activities and
technology involved in the creation and sale of a product.

GREAT!!!
You may now proceed to the main lesson.

IV. DEVELOPMENT OF THE LESSON

Based on the preliminary activities, what did you notice about it?
________________________________________________________
CONGRATULATIONS!
You may now proceed to the lesson.

WHAT IS ERP?
The term Enterprise Resource Planning (ERP) can mean different things, depending on one’s ERP
represents a comprehensive software approach to support decisions concurrent with planning and controlling
the business. On the other hand, for the information technology community, ERP is a term describing a
software system that integrates application programs in finance, manufacturing, logistics, sales and
marketing, human resources, and other functions in a firm. This integration is accomplished through a
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ERP, Financials, Sales, and Supply Chain

database shared by all the functions and data-processing applications. ERP systems typically are very
efficient at handling the many transactions that document the activities of a company. For our purposes, we
begin by describing our view of what ERP should accomplish for management, with an emphasis on planning.
Following this, we describe how the ERP software programs are designed and then provide points to consider
in choosing an ERP system. Our special interest is in how the software supports supply chain planning and
control decisions.
ERP systems allow for integrated planning across the functional areas in a firm. Perhaps more
importantly, ERP also supports integrated execution across functional areas. Today, the focus is moving to
coordinated planning and execution across companies. In many cases, this work is supported by ERP
systems.

Consistent Numbers
ERP requires a company to have consistent definitions across functional areas. Consider the problem of
measuring demand. How is demand measured? Is it when manufacturing completes an order? When items
are picked from finished goods? When they physically leave the premises? When they are invoiced? When
they arrive at the customer sites? What is needed is a set of agreed-on definitions that are used by all
functional units when they are processing their transactions. Consistent reporting of such measures as
demand, stockouts, raw materials inventory, and finished goods inventory, for example, can then be
accomplished. This is a basic building block for ERP systems.
Companies implementing ERP strive to derive benefits through much greater efficiency gained by an
integrated supply chain planning and control process. In addition, better responsiveness to the needs of
customers is obtained through the real-time information provided by the system. To better understand how
this works, we next describe features of ERP software.
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ERP, Financials, Sales, and Supply Chain

Software Imperatives
There are four aspects of ERP software that determine the quality of an ERP system:
1. The software should be multifunctional in scope with the ability to track financial results in monetary terms,
procurement activity in units of material, sales in terms of product units and services, and manufacturing or
conversion processes in units of resources or people. That is, excellent ERP software produces results
closely related to the needs of people for their day-to-day work.
2. The software should be integrated. When a transaction or piece of data representing an activity of the
business is entered by one of the functions, data regarding the other related functions are updated as well.
This eliminates the need for reposting data to the system. Integration also ensures a common vision—we all
sing from the same sheet of music.
3. The software needs to be modular in structure so it can be combined into a single expansive system,
narrowly focused on a single function, or connected with software from another source/application.
4. The software must facilitate basic planning and control activities, including forecasting, production
planning, and inventory management.

An ERP system is most appropriate for a company seeking the benefits of data and process integration
supported by its information system. Benefit is gained from the elimination of redundant processes, increased
accuracy in information, superior processes, and improved speed in responding to customer requirements.
An ERP software system can be built with software modules from different vendors, or it can be
purchased from a single vendor. A multivendor approach can provide the opportunity to purchase “best in
class” of each module. But this is usually at the expense of increased cost and greater resources that may
be needed to implement and integrate the functional modules. On the other hand, a single-vendor approach
may be easier to implement, but the features and functionality may not be the best available.

Transaction processing
This is the posting and tracking of the detailed activities of a business.

Decision support
This is the ability of the system to help a user make intelligent judgments about how to run the business.
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ERP, Financials, Sales, and Supply Chain

HOW ERP CONNECTS THE FUNCTIONAL UNITS

A typical ERP system is made up of functionally oriented and tightly integrated modules. All the modules
of the system use a common database that is updated in real time. Each module has the same user interface,
similar to that of the familiar Microsoft Office products, thus making the use of the different modules much
easier for users trained on the system. ERP systems from various vendors are organized in different ways,
but typically modules are focused on at least the following four major areas: finance, manufacturing and
logistics, sales and marketing, and human resources.
Exhibit 17.2 depicts the scope of ERP applications. The diagram is meant to show how a comprehensive
information system uses ERP as its core or backbone. Many other software-based functions may be
integrated with the ERP system but are not necessarily included in the ERP system. The use of more
specialized software such as decision support systems can often bring significant competitive advantages to
a firm. The following brief descriptions of typical module functionality give an indication of how comprehensive
the applications can be.

The Scope of ERP Applications

FINANCE
As a company grows through acquisition, and as business units make more of their own decisions, many
companies find themselves with incompatible and sometimes conflicting financial data. An ERP system
provides a common platform for financial data capture, a common set of numbers, and processes, facilitating
rapid reconciliation of the general ledger. The real value of an ERP system is in the automatic capture of
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ERP, Financials, Sales, and Supply Chain

basic accounting transactions from the source of the transactions. The actual order from a customer, for
example, is used not only by manufacturing to trigger production requirements, but also becomes the
information for updating accounts payable when the order is actually shipped.

Manufacturing and Logistics

This set of applications is the largest and most complex of the module categories. The system
components discussed in this section of the book are concentrated in this area. Typical components include:
• Sales and operations planning coordinates the various planning efforts, including marketing
planning, financial planning, operations planning, and human resource planning.
• Materials management covers tasks within the supply chain, including purchasing, vendor
evaluation, and invoice management. It also includes inventory and warehouse management
functions to support the efficient control of materials.
• Plant maintenance supports the activities associated with planning and performing repairs and
preventative maintenance.
• Quality management software implements procedures for quality control and assurance.
• Production planning and control supports both discrete and process manufacturing. Repetitive
and configure-to-order approaches are typically provided. Most ERP systems address all phases of
manufacturing, including capacity leveling, material requirements planning, just-in-time (JIT), product
costing, bill of materials processing, and database maintenance. Orders can be generated from sales
orders or from links to an Internet site.
• Project management systems facilitate the setup, management, and evaluation of large, complex
projects.

SALES AND MARKETING

This group of system components supports activities such as customer management; sales order
management; forecasting, order management, credit checking configuration management; distribution,
export controls, shipping, transportation management; and billing, invoices, and rebate processing. These
modules, like the others, are increasingly implemented globally, allowing firms to manage the sales process
worldwide. For example, if an order is received in Hong Kong, but the products are not available locally, they
may be internally procured from warehouses in other parts of the world and shipped to arrive together at the
Hong Kong customer’s site.
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HUMAN RESOURCES
This set of applications supports the capabilities needed to manage, schedule, pay, hire, and train the
people who make an organization run. Typical functions include payroll, benefits administration, hiring
procedures, personnel development planning, workforce planning, schedule and shift planning, time
management, and travel expense accounting.

CUSTOMIZED SOFTWARE
In addition to the standard application modules, many companies utilize special add-on modules that link
to the standard modules, thus tailoring applications to specific needs. These modules may be tailored to
specific industries such as chemical/petrochemical, oil and gas, hospital, or banking. They may also provide
special decision support functions such as optimal scheduling of critical resources.
Even though the scope of applications included in standard ERP packages is very large, additional
software will usually be required because of the unique characteristics of each company. A company
generates its own unique mix of products and services that are designed to provide a significant competitive
advantage to the firm. This unique mix of products and services will need to be supported by unique software
capabilities, some of which may be purchased from vendors and some that will need to be custom-designed.
Customized software applications are also widely used to coordinate the activities of a firm with its supply
chain customers and suppliers.

DATA INTEGRATION
The software modules, as described earlier, form the core of an ERP system. This core is designed to
process the business transactions to support the essential activities of an enterprise in an efficient manner.
Working from a single database, transactions document each of the activities that compose the processes
used by the enterprise to conduct business. A major value of the integrated database is that information is
not reentered at each step of a process, thus reducing errors and work.
Transactions are processed in real time, meaning that as soon as the transaction is entered into the
system, the effect on items such as inventory status, order status, and accounts receivable is known to all
users of the system. There is no delay in the processing of a transaction in a real-time system
To facilitate queries not built into the standard ERP system software, a separate data warehouse is
commonly employed. A data warehouse is a special program (often running on a totally separate computer)
that is designed to automatically archive and process data for uses that are outside the basic ERP system
applications. For example, the data warehouse could, on an ongoing basis, perform the calculations needed
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for the average lead time question. The data warehouse software and database is set up so that users may
access and analyze data without placing a burden on the operational ERP system. This is a powerful
mechanism to support higher-level decision support applications. See the nearby OSCM at Work box titled
“Open Information Warehouse.”

Real time
As soon as a transaction is entered, the effect is known by all users of the system.

Data warehouse
A special program that is designed to automatically capture and process data for uses that are outside
the basic ERP system applications.

SUPPLY CHAIN
ERP is concerned with all aspects of a supply chain, including managing materials, scheduling machines
and people, and coordinating suppliers and key customers. The coordination required for success runs
across all functional units in the firm. Consider the following simple example to illustrate the degree of
coordination required.

A supply chain is the network of all the individuals, organizations, resources, activities and technology
involved in the creation and sale of a product. A supply chain encompasses everything from the delivery of
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source materials from the supplier to the manufacturer through to its eventual delivery to the end user. The
supply chain segment involved with getting the finished product from the manufacturer to the consumer is
known as the distribution channel.

Steps in the supply chain

The fundamental steps of a supply chain in order are as follows:
• Sourcing raw materials.
• Refining those materials into basic parts.
• Combining those basic parts to create a product.
• Order fulfillment/Sales.
• Product delivery.
• Customer support and return services.

The amount of time it takes any one of these processes from start to completion is known as lead time.
Supply chains are managed by supply chain managers, who monitor lead time and coordinate the processes
in each step to maximize customer satisfaction.
Supply chains can be contrasted against value chains -- they contribute to the end product in different
ways. Supply chains aim to meet customer demands. Value chains seek to add value to a product on top of
its inherent value. The purpose of the value chain is to give the company a competitive advantage in the
industry. Supply chain management and value chain management are two slightly different perspectives on
the same basic process and work in tandem to meet two slightly different definitions of "demand."

Supply chain management

Supply chain management (SCM) is the oversight of materials, information and finances as they move
in a process from supplier to manufacturer to wholesaler to retailer and then to the consumer. The three main
flows of the supply chain are the product flow, the information flow and the finances flow. These occur across
three main stages: strategy, planning and operation. SCM involves coordinating and integrating these
flows both within and among companies.
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Supply chain models

There are several common supply chain business models that supply chains fit into. The models have
two main focuses: responsiveness and efficiency. Each model strives for some combination of both but
approaches those goals differently. In addition, models tend to favor one over the other. Organizations can
evaluate the value proposition of each in relation to their goals and constraints, and choose which suits them
best.
• Continuous flow model -- works best for mature industries with a degree of stability.
• Agile model -- works best for industries with unpredictable demand and products that are made to
order.
• Fast chain model -- works best for products with a short lifecycle, such as fashion items.
• Flexible model -- works best for industries with a level of stability and a few relatively predictable
demand peaks.
• Custom configured model -- focuses on customizing.
• Efficient chain model -- works best for highly competitive markets in which pricing plays a large part.
The models are subject to overlap and should be designed by the supply chain manager to fit the unique
supply chain.

We had just finished the discussion on ERP, Financials, Sales, and Supply
Chain. Let’s move on to the next higher level of activity/ies or exercise/s that
demonstrate your potential skills/knowledge of what you have learned.
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V. ANALYSIS, APPLICATION AND EXPLORATION

ACTIVITY 1
Name: _________________________________ Date: __________________
Year & Section: _________________________ Score: _________________
Direction: Read each statement below and fill in the missing words from the word bank.

Transaction Processing ERP Modules Human Resources Quality

Decision Support Software Project Materials Data Integration

1. __________ represents a comprehensive software approach to support decisions concurrent with

planning and controlling the business.
2. __________ must facilitate basic planning and control activities, including forecasting, production
planning, and inventory management.
3. __________ is the posting and tracking of the detailed activities of a business.
4. __________ is the ability of the system to help a user make intelligent judgments about how to run the
business.
5. A typical ERP system is made up of functionally oriented and tightly integrated __________.
6. __________ management covers tasks within the supply chain, including purchasing, vendor evaluation,
and invoice management.
7. __________ management software implements procedures for quality control and assurance.
8. __________ management systems facilitate the setup, management, and evaluation of large, complex
projects.
9. __________ supports the capabilities needed to manage, schedule, pay, hire, and train the people who
make an organization run.
10. __________ is designed to process the business transactions to support the essential activities of an
enterprise in an efficient manner.

Finally, let us summarize the lesson of what we had discussed today.

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VI. GENERALIZATION

Name: _________________________________ Date: __________________

Year & Section: _________________________ Score: _________________
Direction: Explain the following terms.
1. Enterprise Resource Planning (ERP)
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

2. Finance
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

3. Sales
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

4. Supply Chain
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

KUDOS!
You have come to an end of Module 7.
OOPS! Don’t forget that you have still an assignment to do.
Here it is….
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VII. ASSIGNMENT

Name: _________________________________ Date: __________________

Year & Section: _________________________ Score: _________________
Direction: Write TRUE if the statement is correct, otherwise write FALSE.
_______ 1. Agile model works best for products with a short lifecycle, such as fashion items.
_______ 2. Fast chain model works best for industries with unpredictable demand and products that are
made to order.
_______ 3. ERP is the oversight of materials, information and finances as they move in a process from
supplier to manufacturer to wholesaler to retailer and then to the consumer.
_______ 4. Data warehouse is special program that is designed to automatically capture and process
data for uses that are outside the basic ERP system applications.
_______ 5. Real time describes various operations in computing or other processes that must guarantee
response times within a specified time.
_______ 6. Quality management covers tasks within the supply chain, including purchasing, vendor
evaluation, and invoice management.
_______ 7. Materials management software implements procedures for quality control and assurance.
_______ 8. ERP is an application that automates business processes, and provides insights and internal
controls.
_______ 9. Finance is a term broadly describing the study and system of money, investments, and
other financial instruments.
_______ 10. Sales is an activity related to selling or the number of goods sold in a given targeted time
period.

After your long journey of reading and accomplishing the module, let us now
challenge your mind by answering the evaluation part of this module.
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VIII. EVALUATION

Name: _________________________________ Date: __________________

Year & Section: _________________________ Score: _________________
Direction: Read each sentence/ situation carefully and select the BEST answer among the choices and
encircle its corresponding letter.
1. It is a type of supply chain model works best for industries with unpredictable demand and products that
are made to order.
A. Fast Chain Model B. Efficient Chain Model C. Agile Model D. Flexible Model
2. It is a type of supply chain model works best for products with a short lifecycle, such as fashion items
A. Fast Chain Model B. Efficient Chain Model C. Agile Model D. Flexible Model
3. It is a type of supply chain model works best for industries with a level of stability and a few relatively
predictable demand peaks.
A. Fast Chain Model B. Efficient Chain Model C. Agile Model D. Flexible Model
4. It is an application that automates business processes, and provides insights and internal controls.
A. Supply Chain C. Data Warehouse
B. Supply Chain Management D. Enterprise Resource Planning
5. It is the oversight of materials, information and finances as they move in a process from supplier to
manufacturer to wholesaler to retailer and then to the consumer.
A. Supply Chain C. Data Warehouse
B. Supply Chain Management D. Enterprise Resource Planning
6. It is the network of all the individuals, organizations, resources, activities and technology involved in the
creation and sale of a product.
A. Supply Chain C. Data Warehouse
B. Supply Chain Management D. Enterprise Resource Planning
7. A term broadly describing the study and system of money, investments, and other financial instruments.
A. Sales B. Finance C. Materials Management D. Quality Management
8. An activity related to selling or the number of goods sold in a given targeted time period.
A. Sales B. Finance C. Materials Management D. Quality Management
9. This components covers tasks within the supply chain, including purchasing, vendor evaluation, and
invoice management.
A. Sales B. Finance C. Materials Management D. Quality Management
10. This area is accountable for the software quality and assurance before implementation.
A. Sales B. Finance C. Materials Management D. Quality Management

CONGRATULATIONS on reaching the end of this module!

You may now proceed to the next module.
Don’t forget to submit all the exercises, activities and portfolio
on ___________________.
KEEP UP THE GOOD WORK.
Well Done!!!