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Concepts in Enterprise Resource Planning 2 nd Edition Chapter 1 Business Functions, Processes, and Data Requirements

Concepts in Enterprise Resource Planning 2 nd Edition Chapter 1 Business Functions, Processes, and Data Requirements. Chapter Objectives. Name a business's main areas of operation. Differentiate a business process from a business function.

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Concepts in Enterprise Resource Planning 2 nd Edition Chapter 1 Business Functions, Processes, and Data Requirements

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  1. Concepts in Enterprise Resource Planning 2nd Edition Chapter 1 Business Functions, Processes, and Data Requirements

  2. Chapter Objectives • Name a business's main areas of operation. • Differentiate a business process from a business function. • Identify the kinds of data that each main functional area produces. • Identify the kinds of data that each main functional area needs. • Define integrated information systems and state why they are important

  3. ERP Overview • Enterprise Resource Planning (ERP) programs are software used by companies to manage information in every area of the business. • ERP programs help manage company-wide business processes using a common database and shared management reporting tools. • ERP software supports the efficient operation of business processes by integrating activities throughout a business.

  4. What is ERP Anyway? • “Enterprise Resource Planning” • A set of integrated software modules for supporting all of an enterprise’s processes in real-time. • Sales, Production, Logistics, Purchasing, Accounting, and Human Resources share relevant information with each other as needed.

  5. Functional areas of operation • Marketing and Sales • Production and Materials Management (SCM) • Accounting and Finance • Human Resources

  6. Business Processes • Managers now think in terms of business process • Take the customer’s perspective

  7. Your first business enterprise…

  8. Think in terms of business processes… • What are the processes involved in running a lemonade stand? • Assume one person • Assume cash business Inputs Process Outputs

  9. Sample Lemonade Processes Get supplies together Get OK From Mom Make Sign(s) Get OK From Mom Make lemonade Rake in The cash Make lemonade Make lemonade Set up table Choose location

  10. Sample Lemonade Processes Get supplies together Get OK From Mom Make Sign(s) Get OK From Mom Make lemonade Is it feasible? How much do we make? What supplies do I need? How much to charge? Rake in The cash Make lemonade Make lemonade Set up table Choose location Who are my customers? Is it worth continuing?

  11. Your enterprise partners… Customers Friends Mom/Dad Grocery

  12. Lemonade Stand Exercise • Point of this exercise? • We can view everything we do, personal and professional as a set of processes. • Start to think about how our decisions affect others and their processes What would happen if all the partners in this process had access to each other’s information in real-time?

  13. Functional Silo View of an Organization Production Logistics Sales Accounting Purchasing

  14. Functional Silo View of an Organization Production Logistics Sales Accounting Purchasing

  15. Functional Silo View of an Organization Production Logistics Sales Accounting Purchasing

  16. Functional Silo View of an Organization Production Logistics Sales Accounting Purchasing

  17. Functional Silo View of an Organization Production Logistics Sales Accounting Purchasing

  18. Functional Silo View of an Organization Information? Production Logistics Sales Accounting Purchasing

  19. Cross-Functional Nature of the Order Management Process Check Credit Process Quote Commit Produce Deliver Bill Collect

  20. Cross-Functional Nature of the Order Management Process Check Credit Process Quote Commit Produce Deliver Bill Collect Sales & Distribution Production Planning Financial Materials Mgmt Accounting

  21. Cross-Functional Nature of the Order Management Process Check Credit Process Quote Commit Produce Deliver Bill Collect Sales & Distribution Production Planning Financial Modules Materials Mgmt Accounting

  22. Functional Areas of Operation • Most companies have four main functional areas: • Marketing and Sales (M/S) • Supply Chain Management (SCM) • Accounting and Finance (A/F) • Human Resources (HR) • Each main functional area consists of a number of narrower business functions specific to the functional area. • Historically, businesses have organized themselves according to business functions. • Business Schools continue to be similarly organized.

  23. Functional Areas of Operation

  24. Information System • An information system includes the: • Computers • People • Procedures • Software • Required to store, organize and deliver information • Information systems are a critical tool for integrating business functions

  25. Business Processes • A business process is a collection of activities that takes one or more inputs and creates an output that is of value to the customer • The customer may be the traditional external customer who buys the product or service, or an internal customer (a colleague in another department) • The business process view is the customer’s perspective. • The customer does not care that different functions are involved in processing their order, and will not tolerate mistakes and delays caused by poor coordination of business functions

  26. Process View of Business Customer Order Process Sales Function Accounting Function Purchasing Function Production Function Logistics Function Material Order Process Figure 1-3 A process view of business

  27. Integration of Business Functions • Sharing data efficiently and effectively within and between functional areas leads to more efficient business processes • Information systems that share data between functional areas are called Integrated Information Systems

  28. Another Look—Nova Chemicals • According to John Wheeler, CIO of Nova Chemicals, changing from a function-oriented view to a process-oriented is a complicated process • Business processes include: • People with particular skill sets • Information • Tools • Correct organizational culture

  29. Another Look—Nova Chemicals • Nova has identified 3 core processes: • Demand Chain Management • Supply Chain Management • Manufacturing Management • And three enabling business processes • Human Resources (includes corporate communications) • Treasury • Information Technology • Process Boards consisting of managers from various functional areas define “best practices” and process metrics—clear measurements to manage business processes

  30. Lemonade Stand Functional Areas • Marketing and Sales • Develop products • Determine pricing • Promote products • Take customer orders • Make sales forecast • Track repeat customers to send flyers or thank-yous • Manage credit

  31. Lemonade Stand Functional Areas • Supply Chain Management • Buying raw materials (purchasing) • Making lemonade • Manage recipe • Maintain manufacturing (cost) records

  32. Lemonade Stand Functional Areas • Accounting and Finance • Recording raw transaction data • Sales, raw material purchases, payroll, cash receipts • Provide data for sales forecasting, credit management, cash management

  33. Lemonade Stand Functional Areas • Human Resources • Recruit, train, evaluate and compensate employees • Develop personnel plans (staffing) based on sales • Determine compensation—depends on labor market

  34. Functional Area Information Systems

  35. Marketing and Sales • Inputs • Customer data • Order data • Sales trend data • Per-unit cost • Outputs • Sales strategies • Product pricing

  36. Functional Area Information Systems

  37. Supply Chain Management • Inputs • Product sales data • Production plans • Inventory levels • Outputs • Raw material orders • Packaging orders • Resource expenditure data • Production and inventory reports

  38. Functional Area Information Systems

  39. Accounting and Finance • Inputs • Payments from customers • Accounts receivables data • Accounts payables data • Sales data • Production and inventory data • Payroll and expense data • Outputs • Payments to suppliers • Financial reports • Customer credit data

  40. Functional Area Information Systems

  41. Human Resources • Inputs • Personnel forecasts • Skills data • Outputs • Regulation compliance • Employee training and certification • Skills database

  42. Why implement ERP? • Technological reasons • Business reasons

  43. Other Organizations implemented ERP for these Technology Reasons 42 Y2K disparate systems 37 poor quality of information 26 systems not integrated 19 difficulty integrating acquisitions 12 obsolete systems 11 unable to support growth 6

  44. Common Business Reasons for implementing ERP 27 poor performance 24 high costs not responsive to customers 21 20 complex processes unable to support strategies 15 15 globalization inconsistent business processes 10

  45. Business Process Reengineering • BPR is the creation of entirely new and more effective business processes, without regard for what has gone before. • BPR is cross-functional by its very nature • BPR involves questioning assumptions • Text prefers “Business Engineering” term to describe redesign of entire process chains across functional and even organizational boundaries

  46. ERP Industry • 80% of Fortune 1000 have implemented • includes MSFT, IBM, and APPLE • 30-40%+ annual revenue growth for 1995-2000 (SAP +22% 2005) • partly attributable to Y2K re-engineering • Major players • SAP ---60% of market • PeopleSoft • JDEdwards, Baan/Invensys, Oracle, SCT, SGAI

  47. What is SAP? • A series of integrated core business application modules for transaction processing • A set of functions that implement best business practices • Client/Server software that processes business transactions • A methodology for implementing application software • SAP (Pronounced “Ess, Ay, Pee”!) is industry standard in: • software, oil, chemicals, consumer goods, electronics • Expanding into: • healthcare, government, pharmaceuticals, automotive, construction, retail, service

  48. What does SAP Stand For? a. Solves All Problems b. Select Another Package c. Shut-up And Pay d. Submit And Pray e. Such A Pity f. Systems, Applications & Products

  49. SD Sales & Distribution FI Financial Accounting MM Materials Mgmt. CO Controlling PP Production Planning AM Fixed Assets Mgmt. R/3 Client / Server ABAP/4 QM Quality Manage-ment PS Project System PM Plant Main-tenance WF Workflow HR Human Resources IS Industry Solutions Name That Module. . . Comprehensive functionality Integrated solutions Open systems Designed for all types of business Client / server architecture Enterprise data model Multinational

  50. What are some of the typical roles on an SAP Project? a. Functional Module Analyst/Configurator b. ABAPper Coding ICE or EDI c. Integration Expert d. Basis Consultant/System Admin. e. All Of The Above

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