Concepts in Enterprise Resource Planning

Chapter One
Business Functions and Business Processes

Objectives
After completing this chapter, you will be able to:
 
 main functional areas ( )   


 !"##  $%  (business process)   
&' *  (business function)
 $%+$- 
#$ main functional area  ./
 $%+$- 
#$ functional area # 
 ! integrated information systems $%!0. ""1
2

Introduction
 Enterprise Resource Planning (ERP) programs: 2&#**
3 +4 (
Core software) 
35!%6# 7 8
+$9 7 
 0+8 7 
 !$% 
/  "*
 ;$"
  ! (shared
management reporting tools)
 Business process:  # 7 
8#% +$
+4#*8#! ! .
2.
"<""

Functional Areas and Business Processes

 8
 ERP 0./ #  "*.
7 /  0
! 0 5!
0+$8<
    (Functional areas of operation)
 $%  (Business processes)

Functional Areas of Operation








Function Areas of Operation 

=>!!$# (Marketing and Sales (M/S))
=>!52+ (Supply Chain Management (SCM))
=>!%1$  (Accounting and Finance (A/F))
=>!8!6!* (Human Resources (HR))
Business functions: @" # 7 
./  
 (functional area of operation)

Functional Areas of Operation (contDd.)

Examples of functional areas of operation and their business functions

Functional Areas of Operation (contDd.)

  # 7 !8.
89! (interdependent)
 5!#$ !# 
##  
 7 


!
 %< 0./!0++%+  
 
0  (workflow) $"@  "*
 Information system (IS): Computers, people, procedures, and software that
store, organize, and deliver information

Business Processes
 %# 7 /!# 8#.
+$- $
+40+8
 #*8#"<"#" "
/!3. "
-! "* (8 )   "-!@0
  J$% K   " 
!L
/ ! @ "* # #  "

Business Processes (contDd.)

Sample business processes related to the sale of a personal computer

9

Business Processes (contDd.)

 /
#  (transaction)  7 "8<  "

 Successful customer interaction
 " (0$+4"-! -!@#) $0+4# 
+N8* (interact) %#$ business function 

! %$%
/ 7
 L 
+$%"@$  (business
operations)  
""8. 8

10

Business Processes (contDd.)

 ! +$-8$+$L$ $-!
 / ! (functional areas) !0+$%! 
+$-8
 Integrated information systems: Systems in which functional areas share data

11

Business Processes (contDd.)

A process view of business

12

Business Processes (contDd.)

 / !!8## 7 (  8!# 7) +
!+
(transform) (5!$% ) +4"$%%"
 8#: #3%   "
  /"
  +4#
 8#$$% 0! +$-8 !# 
9
!$!

13

Functional Areas and Business Processes of a Very Small Business

 Example: A fictitious lemonade stand
 Examine business processes of the lemonade stand
 See why coordination of functional areas helps
achieve efficient and effective business processes
 Look at how integration of the information system
improves the business

14

Marketing and Sales

 Functions of Marketing and Sales
 8T" (Developing products)
 "! (Determining pricing)
  !"0+" (Promoting products to customers)
 %"
2 /" (Taking customersD orders)
 ! 8!<*!! (Helping create a sales forecast)

15

Marketing and Sales (contDd.)

 Marketing and Sales tasks for the lemonade stand
 0+4# @%%.! +4  (Formal recordkeeping not
required)
 # ##" (keep track of customers)
 8T"30! 0+4 
 "
2 /%!$+4"/!2 /%%"#03. " 7 .

 # %. "#$!" $! $"#
88!  0
16

Supply Chain Management

 Functions within Supply Chain Management

 "
 
/$ (lemonade) (manufacturing/production)
 2 /#3% (purchasing)
  LL## 8!<*!! (Sales forecasts) 
M/S functional area
 Sales forecasts: Analyses that attempt to predict the future sales of a product

17

Supply Chain Management (contDd.)

 LL#$3 "# #3%$ packaging
 Raw materials: Bottled spring water, fresh lemons, artificial sweetener, raw
sugar
 Packaging: 3!, , $6@ 
 SCM $ M/S #   #L #$ lemonade product 
!

18

Accounting and Finance

 Functions within Accounting and Finance
 %.% (raw data) 

! % transactions (including sales), 
2 /#3%, !" (payroll) $%@% "
 Raw data: Numbers collected from those operations, without any manipulation,
calculation, or arrangement for presentation

19

Accounting and Finance (contDd.)

 =>!%1 (Accounting) $  (Finance) $35! =>!
Marketing and Sales %=>! Supply Chain Management
 %.!+4 "*+$%
"1%8!<*!!
 8!<*!!$#%8 $
LL# (production planning)
 %. accounts receivable 3=Y overall creditgranting policy  lemonade stand

20

Human Resources
 Functions of Human Resources
  =[% +$ $!" %8 
 HR 8!<*!! L"# 8 #$
L
 "%$%%# 7 5! ERP software  data sharing #"
+4$ functional area / !

21

Functional Area Information Systems

 Potential inputs $ outputs %#$ functional area $0%!#0+
 Note: +$-# 7  
# #$ area $ L"
/! 0
 Information systems !" 02.
"8*$ all functional areas %
processes

22

Marketing and Sales

 # 9 functional area 
 7 / 
 " "
2 /! M/S +4! 7 0+    telephone, e-mail, fax, Web 

7.
 M/S 
" "
 "0; productDs unit cost %%
+*2@#*
# 8
0+ (some percentage markup)
 9
#  Accounting and Finance $ Supply
Chain Management

23

Marketing and Sales (contDd.)

The Marketing and Sales functional area exchanges data with customers and with
the Human Resources, Accounting and Finance, and Supply Chain Management
24
functional areas

Marketing and Sales (contDd.)

 M/S # #% # Human Resources 8
+
!9
!%"
#   ]! +4#
 8#% M/S
 Customer data
 Order data
 Sales trend data
 Per-unit cost
 Travel expense company policy
25

Marketing and Sales (contDd.)

 #*8# M/S @" 
 Sales strategies
 Product pricing
 Employment needs

26

Supply Chain Management

 # 9! functional area
 LL# (Production Plan) $./%9
!%!"
(product sale / 
!0 $"$!0 (actual and projected)) 2.

0=>! Marketing and Sales
 
0
3# 
!%"
# L#:
 Raw material and packaging # 3
2 /#"+4
 $%"" " # 6!$%#
8
+$! 

27

Supply Chain Management (contDd.)

 $%. Supply Chain Management 3:
 
#  Accounting and Finance 8
#$8!3
0+! 0
 % M/S function 5!9
!% $0
3L#./
$$0
!  0+
 Supply Chain Management +N8*! 7  % Human Resources

28

Supply Chain Management (contDd.)

The Supply Chain Management functional area exchanges data with suppliers and
with the Human Resources, Marketing and Sales, and Accounting and Finance
29
functional areas

Supply Chain Management (contDd.)

 8# SCM
 Product sales data
 Production plans
 Inventory levels
 Layoff and recall company policy

30

Supply Chain Management (contDd.)

 #*8# SCM
 Raw material orders
 Packaging orders
 Resource expenditure data
 Production and inventory reports
 Hiring information

31

Accounting and Finance

 # 9 functional area
 A/F personnel:
 %. transactions  %6 ! (books of account)
 %. accounts payable 
#3%32 /$! "#3%/
7 ( 0 (cash outflow))
 % transaction data 8
#!! 
!% companyDs financial
position $ profitability

32

Accounting and Finance (contDd.)

 " functional area 
 7 # 0+! A/F
 M/S  sales data
 SCM  production and inventory data
 HR  payroll and benefit expense data
 " M/S % "@#  A/F 8
+$"# "

33

Accounting and Finance (contDd.)

The Accounting and Finance functional area exchanges data with customers and with the Human
Resources, Marketing and Sales, and Supply Chain Management functional areas

34

Accounting and Finance (contDd.)

 8#% A/F
 Payments from customers
 Accounts receivable data
 Accounts payable data
 Sales data
 Production and inventory data
 Payroll and expense data

35

Accounting and Finance (contDd.)

 #*8# A/F
 Payments to suppliers
 Financial reports
 Customer credit data

36

Human Resources
 HR @!# 9L
 7 
 

! % HR $
! % employee hiring, benefits, training, $
government compliance
 HR # 8!<*"# 8 
! all functional units
 HR # 
$6$
+4 +$@ 0+
$%63! %8 0

37

Human Resources (contDd.)

The Human Resources functional area exchanges data with the Accounting and Finance,
Marketing and Sales, and Supply Chain Management functional areas

38

Human Resources (contDd.)

 Observing governmental regulations in recruiting, training, compensating,
promoting, and terminating employees
 8# HR
 Personnel forecasts
 Skills data

39

Human Resources (contDd.)

 #*8# HR
 Regulation compliance
 Employee training and certification
 Skills database
 Employee evaluation and compensation

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Human Resources (contDd.)

 
"1 7 $365! functional area / ! $#  
 ( % +') $ functional area / !!
 %% (Timeliness) $ "3# (accuracy)  /$
^##"@ #$ $#"30
%6$"3#%5# %6"#
 ERP software !! functional area ; (common
database)
 Allows accurate, real-time information to be available

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Summary
 Basic functional areas: Marketing and Sales, Supply Chain Management,
Accounting and Finance, and Human Resources
 Marketing and Sales: Sets product prices, promotes products through
advertising and marketing, takes customer orders, supports customers, and
creates sales forecasts
 Supply Chain Management: Develops production plans, orders raw materials
from suppliers, receives raw material, manufactures products, maintains
facilities, and ships products to customers

42

Summary (contDd.)
 Accounting and Finance: Financial accounting to provide summaries of
operational data in managerial reports, controlling accounts, planning and
budgeting, and cash-flow management
 Human Resources: Recruits, hires, trains, and compensates employees, ensures
compliance with government regulations, and oversees the evaluation of
employees
 Information systems capture, process, and store data to provide information
needed for decision making

43

Summary (contDd.)
 Employees working in one functional area need data from employees in other
functional areas
 Functional area information systems should be integrated, so shared data are
accurate and timely
 Managers think in terms of business processes that integrate the functional areas
 Need to share information between functions and functional areas
 ERP software provides this capability by means of a single common
database
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