Enterprise

Systems

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 Learning Objectives
• Describe enterprise systems
• Describe enterprise resources
planning (ERP) systems
• Explain the organization value chain
• Describe relationship of
organization value chain and an
enterprise system
• Illustrate value of systems
integration
• Show how an enterprise’s system
provides support for an
organization’s processes
Enterprise
• Summarize the major modules
contained in an ERP system Systems
• Describe how and enterprise
system supports major business
event processes
• Enumerate the pros and cons of
implementing enterprise systems
 Enterprise Systems on the AIS Wheel

• The enterprise
system cuts across
all accounting
application and
affects control
considerations

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 Enterprise System
• Integrates business processes and
information from entire enterprise
• Helps coordinate the operation of
business functions
• ERP systems are software packages
that can be used for the core systems
necessary to support enterprise
systems

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ERP Systems Vendors

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 SAP
Modules

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 Third-Party Modules
• Customer Relationship Management
(CRM)—builds and maintains customer
related data
– Customer Self-Service (CSS)—allows
customers to complete tasks without
assistance
– Sales Force Automation (SFA)—automates
sales tasks such as order processing and
tracking

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 Third-Party Modules, Cont’d.
• Supply Chain Management (SCM)—
plans and executes demand planning,
inventory acquisition, manufacturing,
distributing and selling
• Product Lifecycle Management (PLM)—
manages product data from design
through disposal of product

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Enterprise Systems Value Chain
• Enterprise systems facilitate value chain
management
• The value chain is the system of
activities that transform inputs into
outputs valued by the customer
• The goal of an organization is to add the
greatest value with the lowest costs
thereby increasing competitive
advantage
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 Value
Chain and
System

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The Value of Systems Integration
• One of the values provided by an enterprise
system is the coordination of value activities
in the value chain.
• The system performs this coordination by
sharing data across business processes.
• In the following slides we describe what life
would be like without integrated systems and
then how enterprise systems solve some of
those problems.
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Inefficient Customer Service
1. Check if the
customer exists
in the system
and has good
credit.

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Inefficient Customer Service
2. Find out if
good can be
promised from
warehouse stock
or if it has to be
scheduled for
manufacturing.
Tell the
customer when
they would
receive
the item. The
date is known as
“available to
promise” or
ATP.

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Inefficient Customer Service
3. If item is not
on the shelf, when
will it be released
from
manufacturing?
Sally could
review production
schedules and add
the time required
to pick, pack, and
ship the item.
This would not,
however, tell her
if the item
had already been
allocated to
another customer.
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Inefficient Customer Service
4. In the event
that the item
must be
manufactured,
when could it be
scheduled, and
how long will
the
manufacturing
process take?

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Inefficient Customer Service
5. How long will
it take vendors to
supply raw
materials so that
manufacturing
can take place?

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Inefficient Customer Service
6. What price
will be charged
to this customer
for this order?
The price to
charge must be
obtained from
marketing.

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Inefficient Customer Service
7. Needs to
check AR
balance to
determine if
customer has
sufficient credit.
Without direct
access to the
open AR data,
Sally will
have to call
accounting to
approve this
order.

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Inefficient Customer Service
8. If credit is
insufficient,
must check with
credit
department for
change in credit
line.

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 Inefficient Customer Service
• Do you think that Sally wants to keep
the customer on the phone throughout
this process?
• Would you consider this to be good
customer service?

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 Solution to Inefficient Customer
Service
• Enterprise system establishes available
to promise (ATP) by checking
warehouses and scheduled
manufacturing
• Price and creditworthiness
automatically determined from database

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Enterprise Systems Store Data in
Tables

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Processing Orders Requires
Multiple Tables

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Stored Data Used for Decisions

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 Major ERP Modules
• Sales and Distribution
– Records customer orders
– Shipping
– Billing
– Connections to
• Materials management module
• Financial accounting module
• Controlling module
• Based on SAP (best selling ERP)
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 Major ERP Modules, Cont’d.
• Materials Management
– Acquisition and management of goods
from vendors
• Purchase order preparation
• Receiving
• Recording invoice
– Interacts with
• Sales and distribution module
• Financial accounting module
• Controlling module

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 Major ERP Modules, Cont’d.

• Financial Accounting
– Plays a central role in an ERP system and incorporates data
from other modules into general ledger accounts and
financial statements
– Business events from other modules, such as SD and MM,
are incorporated by the FI module into the general ledger
accounts and included in the external account statements,
the balance sheet, profit and loss statement, and statement
of cash flows.
– The FI module also includes accounts receivable and
accounts payable functions to record and manage that data
directly and to complete events begun in the SD and MM
modules.

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 Major ERP Modules, Cont’d.

• Controlling and Profitability Analysis

– Handles internal accounting including:
• Cost center accounting
• Profitability analysis for sales
• Activity-based accounting
• Budgeting

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 Major ERP Modules, Cont’d.
• Human Resources
– Recruiting, management and
administration of personnel
– Payroll processing
– Training and travel
– Benefits
– Reports

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Order-to-Cash
1. Respond to
customer
inquiries and
requests for
quotes (RFQs).
Some
companies add
on separate
CRM modules

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Order-to-Cash 2. Record
customer order
including:
check customer
credit; check
inventory
pricing; and
check where
and when
inventory will
be available to
send to the
customer.
Triggers
picking of
goods or
purchase of
goods from
another vendor.
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Order-to-Cash
3. Pick goods
from
warehouse and
pack for
shipment.

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Order-to-Cash 4. Ship goods
to the customer.
ERP system
would choose
the appropriate
routing and
carrier, record
the cost of
goods sold
and inventory
reduction in the
general ledger.
Some ERP
systems trigger
the billing
process when a
shipment takes
place.
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Order-to-Cash
5. Billing the
customer and
recording the
sale in AR.
ERP system
ensures correct
quantities,
prices, terms,
addresses, etc.
ERP system
can be used to
analyze sales
profitability by
comparing
product costs to
selling
price.
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Order-to-Cash
6. Receive and
record payment.
Includes:
recording cash
receipts and
updating cash
and accounts
receivable.
ERP data can
then be used to
manage
customer credit
and invest
available cash.

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Purchase-to-Pay
1. Determine
requirements,
complete
purchase
requisition.
ERP system may
automatically
generate the
purchase
requisition based
on quantity on-
hand, quantity-
on-order, and
expected
demand.
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Purchase-to-Pay
2. Prepare and
record purchase
order.
An ERP system
assists the buyer
in identifying
sources of
supply for the
requested item,
preparing RFQs
to vendors,
analyzing
vendor quotes,
comparing
vendor prices,
terms, and past
performance
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Purchase-to-Pay
3. Receive and
record goods.
Compare
quantity ordered
to quantity
received.
The ERP routes
goods to the
function that
requested them
or directs them
the warehouse
for immediate
sale. It also
records vendor
performance
data.
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Purchase-to-Pay
4. Receive
vendor invoice,
match with PO
and receiving
report; record
payable.
If the three-way
match fails, the
enterprise
system notifies
the proper
personnel to
ensure timely
reconciliation
of differences.

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Purchase-to-Pay
5. Prepare and
record cash
disbursement
and update
accounts.
An ERP
system uses
vendor and AP
data to
schedule
payments in
accordance
with vendor
terms and to
receive
discounts.
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