Functional Areas of ERP

1. Functional Areas of ERP ERP contains numerous modules and functional area within its integrated system. • All areas can access the central database to share data • Additional modules can be added/purchased at any point Examples of functional areas of importance to ABS Baking include: 1) Sales and Distribution: Utilizes the Sales and Distribution module • Customer information is recorded and stored in this module. Customer information is called Master Data in ERP • Records sales orders • Schedules deliveries to clients 2) Supply Chain Management: Utilizes the following modules: A) Production Planning Module : • Records and maintains production activities. • Uses sales information to plan and schedule product production schedules B) Purchasing Module: • Manages the purchase and handling of raw materials, sub assemblies and supplies used to manufacture finished goods 3) Accounting and Finance: Utilizes the following modules: A) Financial Accounting Module: • Records and maintain general ledger transactions. • Responsible for generating financial statements B) Controlling Account Module: • Used for internal management accounting and decision making • Assigns costs • Human Resources: Utilizes the Human Resources module • Manages employee recruiting, hiring, training, compensation, benefits and government compliance

2. Sales inquiry sales order delivery invoice customer payment Sales Order Process • Ordered series of steps required to complete a customer sale in an ERP system • Utilizes Sales and Distribution module STEP 1: Pre sales Activities/ Inquiry: • New Customer: Collect customer data (name, address, etc.) and record in ERP system. This data become the customer master data (remains fairly stable) available for later access and retrieval • Returning Customer: retrieve master data from ERP database • Add/update additional data: pricing, relevant dates, quantities • Uses coded data key fields as opposed to full names STEP 2: Sales Order: • Turn inquiry into a sales and purchase order, made easier because data is already stored within the ERP database • Beginning of a series of documents/documents numbers recording and tracing the sale. These documents will be available and used by numerous module and areas within the ERP system • Sales order: for salesperson , supply chain and production • Purchase order: for customer STEP 3: Delivery: • Pick, pack and ship customer ordered product/s • Goods issue generated: actual point after shipment where inventory levels are reduced STEP 4: Invoice: • Invoice sent to customer for products shipped • Account receivable created in accounting module- adjusts available credit for customer STEP 5: Payment: • Payment received from customer • Adjustment made in customer credit to reflect payment

3. Supply Chain Management:Production Planning • Production planning: process of ordering raw materials to satisfy master scheduling plan. Goal is to schedule production as economically as possible • Utilizes Production planning module • Several MRP methods can be used. Method utilizes based upon product/s, company and business environment Consumption Based MRP • Uses no master production schedule in determining raw material orders • Materials purchased based upon re-order points • Re-order point: pre-defined inventory level, recorded in the Materials master. When inventory levels fall below the re-order point, a requisition is intiated • When re-order point is reached, either manual or automatic triggering of purchase requisitions takes place Sales Forecast/ Historical demand Demand Management Sales, Operations plans Inventory Consumption based MRP Production scheduling Re-order point Production Purchase requisition

4. Example of Consumption Based MRP for ABS Baking • Raw material item: Bread crates. Since bread crates are not used for every order shipped, this raw material item is a perfect fit for Consumption based MRP • Re-order point: 30 units • Starting inventory: 300 units Starting inventory: 300 crates Order processed Using 135 crates Order processed Using 150 crates Order processed using no crates inventory count In ERP: 300 units Inventory of crates reduced by 150 Inventory of crates Reduced to 15 units Inventory of crates remains at 150 Inventory count: 150 units Re-order point of 30 units has been reached triggering a purchase requisition 300 crates purchased Inventory count: 150 units Inventory count: 15 units Inventory count: 315 units

5. Purchase Requisition Purchase order Goods received invoice payment Purchasing: • Purchasing: Utilizes Materials Requirement Planning methods to control raw material purchases as efficiently as possible • Purchasing Process Flow: • Ordered series of steps required in order to purchase raw materials, sub-assemblies or supplies from a vendor with an ERP system • Utilizes Purchasing module STEP 1: Purchase requisition: • Request to purchase. Most be approved by management or designated buyer • Can be generated manually or automatically by the ERP system • Uses Master Materials Data, raw materials version of Customer Master data. STEP 2: Sales Order: • Requisition becomes a purchase order • Series of documents/documents numbers recording and tracing the sale. These documents will be available and used by numerous module and areas within the ERP system STEP 3: Delivery: • Materials received, processed and recorded into ERP system • Goods Receipt generated: increases inventory level based upon materials received STEP 4: Invoice: • Invoice sent to customer for products shipped • Account payable created in accounting module STEP 5: Payment: • Payment made to vendor • Accounts payable entity adjusted to reflect payment

6. Accounting • With an ERP system, accounting data is integrated with other function areas ensuring data is complete, accurate and up to date • Utilizes the following modules: A)Financial accounting module: contains general ledger for posting/re-posting of expenses and payments • General Ledger: complete record of all business transactions • General ledger accounting: used for reporting transaction that have a financial impact on the organization • Automatic and simultaneous posting/updating. Allows for real time evaluation of data and reports • G/L: broken into three groups: balance sheet: items that show up in the balance sheet, show assets: company owned items, liabilities: company owes.debt and equity: net value of company sum of assets and liabilities • G/L profit/loss accounts: track income and expenses • P/L-Revenue accounts: record revenues from selling goods • P/L-Expense accounts: money spent to produce goods • Reconciliation accounts: keep track of changes made to general ledger/sub-ledger, reconciliation account is automatically updated when a posting is made • G/L Master record: g/L accounts are maintained as master data: accounts, materials, customers, vendors, remains fairly stable, always kept in ERP system. Transactional data: data that frequently changes and is removed and archived in ERP system B)Control accounting module: used for internal corporate accounting, used by management for decision making, reporting and allocating costs • Captures expenses from FI module that are relevant and identified in the CO module: these are called primary cost elements in ERP • Secondary cost elements: used only for CO transactions have no corresponding G/L account, can be used to transfer costs from one cost center to another, used for allocation and settlement • Cost center: track where costs take place in an organization, as costs are incuured, they are brokend down into appropriate cost centers. Cost center hierarchy: used to structure cost centers

7. Accounting Example for ABC Baking using ERP • When a G/L posting is made with an identified primary cost element in the CO module, when the item is posted, it is also posted in the CO module • Primary cost elements must first exist in the General ledger • Secondary cost elements have no G?l account, used exclusively for internal CO transactions, used for allocation and settlements

8. Human Resources • Responsible for managing the human capital of an organization • HR duties range from recruitment and hiring to training and termination • There is an immense amount of data and information related to each employee. Some of this information is needed by other departments and individuals. • Additionally, there are compliance issues and government regulations related to personnel that must be maintained and documented • An integrated ERP Human Resource system would allows for more efficient access to employee data and better management of a employee workforce Human Resource module • Integrates all human resource functions into a single module. • Provides easier access and retrieval of employee information. Reduces paper load, human error and delays • Provides greater detail than non-electronic systems. Distinguishes between task, job, position and person • Information in database is available to any individual with proper authorization • Complete and accurate human resource data simplifies a manages job • Data from HR module can be used to make better management decisions • Includes tools for recruiting, hiring, defining company roles and responsibilities, managing employee personal information, payroll, time management, training and more • Examples include: A)Payroll: most important HR function B) Time management: attribute an employees time to a particular job C)Travel management: maintains travel data for each employee D)Training and development: supports the planning and implementation of training programs • Examples of additional tools include: 1) Mobile time management 2) family and medical leave 3) domestic partner support 4) management of long term incentives 5) personnel cost planning 6) global employee support including payroll