Concepts in Enterprise

Resource Planning, Fourth

Edition 1-1
Chapter 1:
Business Fun
Concepts in Enterprise
Resource Planning, Fourth
Edition 1-1
Chapter 1:
Business Fun
CHAPTER 1
1/ Distinguish between a business function and a business process. Describe how a
business process cuts across functional lines in an organization. How might a manager
organize his or her staff in terms of business processes rather than functional
departments? What benefits would there be with this type of organization? What
challenges would it pose?

A business function is a business "activity,” such as sales order processing, production

scheduling, cash-flow management, and recruiting personnel. A business process is a collection
of activities that takes one or more kinds of input and creates an output that is of value to the
customer
A business process occurs
when a series of activities
are performed in more than
one
functional area. Making and
selling a product to a
customer is a process that
involves
sales, production, and
accounting activities. The
people who work in each
activity
must work together to make
the sale go smoothly - taking
the order, scheduling
production, shipping the
product, recording data
about production and sales
and the
ultimate collection of the
customer's payment
A business process occurs when a series of activities are performed in more than one functional
area. Making and selling a product to a customer is a process that involves sales, production,
and accounting activities. The people who work in each activity must work together to make the
sale go smoothly - taking the order, scheduling production, shipping the product, recording data
about production and sales and the ultimate collection of the customer's payment

Today, business managers try to think in terms of business processes that integrate
thefunctional areas, thus promoting efficiency and competitiveness. An important aspect of this
integration is the need to share information between functional areas, and with business
partners. ERP software provides this capability by means of a single common database.

The better a company can

integrate the activities of
each functional area, the
more
successful it will be in
today’s highly competitive
environment. Integration
also
contributes to improvements
in communication and
workflow. Each area’s
information system depends
on data from other
functional areas
The better a company can integrate the activities of each functional area, the more successful it
will be in today’s highly competitive environment. Integration also contributes to improvements
in communication and workflow. Each area’s information system depends on data from other
functional areas

2/ How could a university organize its business education around business processes
rather than business functions? What would be the benefits to students?

Responses will vary. Students could focus on integrating the process involved designing the
following courses: Finance, Marketing, Technology, and Organizational Behavior

Go to the Amazon Web site

(http://www.amazon.com), and
step through the
process of buying an item
without actually purchasing
the item. Based on this
experience, describe the flows
of information between
Marketing and Sales,
Accounting and Finance, and
Supply Chain Management at
Amazon. How easy
is it to buy that item?
3/ Go to the Amazon Web site (http://www.amazon.com), and step through the process
of buying an item without actually purchasing the item. Based on this experience,
describe the flows of information between Marketing and Sales, Accounting and Finance,
and Supply Chain Management at Amazon. How easy is it to buy that item?

Amazon’s order process:

1. Marketing and Sales: Customers chooses an item and adds it to her shopping cart.

2. Accounting and Finance: Receives information from Marketing and Sales that customer wants
to checkout.

3. Accounting and Finance: Processes payment.

4. Supply Chain Management: Ships order after receiving information from Accounting and
Finance that payment process is complete

6/ Think of the last time you bought a high-tech electronic item. How does the process of
buying that item cut across the store’s various functional lines? What information from
your receipt would need to be available to the business functions? Which business
functions would need that information? How could your receipt help in the process of
returning that item?

1. A receipt has information about the customer. That information is important for sales and
marketing

2. A receipt has information about what was purchased. This information is important for the
stocking of future items (supply chain management)

3. A receipt also most likely has a bar code for future reference to that sales transaction. For
example, if the item was returned to the store, that bar code couldbe scanned, the item put back
into inventory, and the customer’s account credited

4. A receipt would also have information important to accounting and finance, that is the sale
and the movement of the goods from inventory out of the door

5. A receipt would have information on who the sales person was who did the sale. This is
information important to human resources for performance reviews, raises and bonuses

CHAPTER 2
1/ What are the main characteristics of an ERP system? What are some newly developed
features of ERP systems?

Main characteristics of an ERP system:

1.Single database

2.Consistent information

3.Management control

4.Open architecture

5.Global integration

6.Easier maintenance due to one system, not many legacy systems

Newly developed features of ERP systems:

1.ASAP – Accelerated SAP implementation methodology

2.BW – Business Warehouse

3.BI – Business Intelligence

4.CRM – Customer Relationship Management5.NetWeaver

CHAPTER 3
1/ Assume you are Fitter Snacker’s new marketing manager, hired to clean up some of
the company’s problems, as outlined in the beginning of this chapter. You just started this
job, and you are getting to know your sales team and the company’s processes. Describe
all the problems you observe about the way Fitter’s sales force currently takes and fills
an order. Now convince upper management of the need to improve the existing system
and put an ERP system in place.

Fitter Snacker Problems Sales quotes and orders Quotes and orders are first recorded by hand,
on paper. Data entry errors are possible, as well as calculation errors (pricing, discounts, credit)
especially since this is your new job and you are nervous. Quotes and orders are sometimes
conveyed by fax –again, paper-based. Faxes can be misinterpreted or illegible. Data is
communicated within Fitter by fax, by phone, and by word of mouth. Usually this means that
those in Sales, Accounting, and the Warehouse do not have up–to-date and complete
information. This leads to (for example):

- Inability to forecast delivery dates and promising infeasible delivery datesInability to handle
customer inquiries properly, which leads to customer frustrationErrors in calculating proper
discounts – too much or too little can be given

- Errors in credit checks – credit can be denied to worthy customers ERP system treatment

- Quotes and orders are handled electronically

- Data is stored in one central database

- Calculations are programmed, to reduce errors

- Use of ERP reduces delays and errors and therefore reduces customer frustration In addition
to just taking the order, there are other phases involved in the process : Inventory sourcing .
There is no coordination between Production and Marketing. Customers usually ask if a certain
number of cases of a product will be available for shipping on the desired date. In Fitter, the
Marketing representative cannot say one wayor another for sure. To answer the question, the
Warehouse personnel must be consulted, and will render a best guess, based on current volume
on hand and assumed production levels. Ideally, the production forecast and the delivery
schedule would be available to answer the customer's question, but Fitter does not have
softwarethat can do that. Thus, it is possible to run out of product at Fitter – or to have an
excesson hand

ERP system treatment The ERP system has the production schedule and the schedule of
deliveries in the database. Inventory sourcing is automatically done. If available, the customer is
informed. If not available the production scheduled can be adjusted. Invoicing problems Data
about sales is sent to Accounting three times a week.

Accounting keys in the data as quickly as they can get to it, and prints out the customer bills
(invoices) at that time as well. Thus, a billing can lag a shipment, and in fact is sent separately by
Fitter. If there are amendments to the order after it is first placed, Accounting may or may not
hear about them in time to prepare a correct invoice. Thus, incorrect invoices maybe sent out.
ERP system treatment The ERP system creates the invoice, which is included with the
shipment. Errors are reduced in this way. Accounting uses the data entered by Marketing, for
the sale, and so the accounting records are up to date and accurate. Recording payments
Customers are supposed to send a paper copy of their invoice in with their payment. If they
do that, Fitter accounting clerks know which orders have been paid and which remain open.
Often customers do not do that, however. Recording the payment properly thus becomes a
time consuming research project for the Fitter accounting clerk

ERP system treatment Customers can be queried for the invoice number(s), if not provided
with the payment.

2/ If Fitter installs an ERP system, how could they reorganize their sales division
to be more efficient? Be specific about how you would rearrange divisions, or
consolidate them.

Responses will vary. An ERP system can improve a company’s sales order process in
several ways. Because an ERP system uses a common database, it can minimize data
entry errors and provide accurate information in real time to all users. An ERP system
can also track all transaction data (such as invoices, packing lists, RMA numbers, and
payments) involved in the sales order process. Therefore, some students may consider
consolidating Fitter’s Wholesale and Direct Sales divisions

3/ Assume you are a new summer intern at Fitter Snacker, working directly under the
CIO. Your first job is to write a memo describing the poor information flow between three
functional areas in the company: Marketing and Sales, Accounting and Finance, and
Supply Chain Management. Focus on the lack of information flow to and from Marketing
and Sales, in particular.

Responses will vary. The following scenario is typical at Fitter Snacker and serves to
demonstrate the lack of information flow between the departments: Say a salesperson calls on a
good customer, Health Express. The salesperson offers Health Express deep discounts for
buying a certain number of NRG bars. At the same time, the Marketing Department is running a
sale on NRG bars. Marketing sends Health Express a flyer advertising the discounted price,
which is less than what the salesperson just offered in person. Meanwhile, the vice president of
Fitter plays golf with the CEO of Health Express and offers yet another discount. The connection
or relationship with the customer is confused because the customer is receiving inconsistent
information. The departments need to streamline their interactions with customers to ensure a
consistent message.

CHAPTER 4
1/ In which industries is supply chain management important? In which industries is it
not? Why, or why not?

Industries that manufacture goods and/or supplies goods to customers place a high value on
supply chain management. For example, the textile industry needs to procure raw materials
and manufacture textiles to sell to the garment and furnishing industry. Students may be able to
think of other industries easily. Encourage them to think of their daily lives: shopping at the
grocery store, visiting a fast food restaurant, or going to the mall.

Those industries not valuing supply chain management would be service-oriented industries
like financial services, banks, law firms, and health care industries. Keep in mind that some of
these industries still have some supply chain issues but they are not as critical as the other
industries.
2/ Recall from Chapter 1 that a business process cuts across functional lines. When a
customer orders a product, such as a custom-built car, the Supply Chain Management
function must interact with other functional areas in a company to complete this order.
List the functional areas involved in this process. What information must pass between
those areas and Supply Chain Management to fill the customer’s needs?

Most companies have four main functional areas of operation: Marketing and Sales (M/S),
Supply Chain Management (SCM), Accounting and Finance (A/F), and Human Resources (HR).

Information that could be shared include: sales orders, payments, product marketing,
advertising, and production runs

3/ Create a two-column list, and in the first column, list Fitter’s flawed supply chain
management process. In the second column, list the ways in which an ERP system could
alleviate some of these problems

Fitter’s flawed supply chain the ways in which an ERP system could
management process alleviate some of these problems.
Identify at least three processes.
Communication problem
 Warehouse inventories are depleted Using SAP ERP system generates a
forecast, and the planner can view the
 Shortage or stockout of these
results graphically
materials
 Unexpected spikes in demand

Inventory problem Using MPS, which is an input to detailed

scheduling, which determines what bars
 Database are not updated in real
to make and when to make them
time
 Lack of trust between sales and
marketing department.

Accounting and purchasing problem Providing Production Data to Accounting,

which means in an integrated ERP
 Standard costs: normal costs of
system, the accounting impact of a
manufacturing a product
material transaction can be recorded
 Production and Accounting must automatically
periodically compare standard costs
with actual costs and then adjust the
accounts for the inevitable
differences
CHAPTER 6
1/ List the steps in a typical recruiting process. Highlight the steps that involve
interaction with the potential job candidate. Identify problems in the process that might
lead a candidate to develop a negative opinion of the company. How might an effective
information system reduce the potential for these problems?

Incorporate into your answer experiences you may have had in looking for a job

1. Requesting department fills out a job vacancy form

2. HR receives this request and makes sure it is filled out completely3.HR gets upper
management approval for hiring

4. Job is initially posted internally

5. Job is posted externally on the Web, in newspapers and perhaps in national publications

6. An HR representative attends career fairs and college campuses

7. HR collects resumes, and screens and classifies them

8. A short list of candidates is selected by the requesting department

9. Interviews are conducted

10. Offers may be made at this point, or even second interviews

Problems with the recruitment process include lost resumes and delayed offers, whichreflect
poorly on the company and puts it at risk for losing good candidates. An integrated information
system would allow for a better sharing of data, without losingcandidate materials. All materials
are held electronically and are available immediately.

CHAPTER 7
1/ Develop a process map for the following outdated course registration process in place
at a

local university:

• Students first fill out forms listing their desired classes. They bring those completed
forms to the academic advisement office, where, working with an advisor, they create a
course selection document. Then, the student fills out a computer-readable form with
Process Modeling, Process Improvement, and ERP Implementationthe course and section
number for all classes approved by the advisor. This form is submitted to the registration
office where it is fed into a document reader, which electronically reads the completed
forms; the data is then written to the master course schedule disk.

• At the end of the two-week registration period, data from the master course schedule
disk is fed into the master scheduling program, which assigns students to courses. The
scheduling program is designed to maximize the number of students who receive their
requested courses while staying within class capacity limits. Once the master scheduling
program has been updated for all students, the program produces three documents: (1)
individual schedules for each student, (2) initial student lists for each class, and (3) the
summary schedule report for the administration.

• After students receive their schedules, they are allowed to drop or add classes for a
period of two weeks. To add or drop a class, a student must first obtain permission from
the professor teaching the class. Once that signature is obtained on the drop/add form,
the student brings the form to the computer center where the clerk enters the change
into the scheduling system, which in turn updates the master course disk. The clerk then
prints out a new schedule for that student.
2/ Develop a process map for the following request-for-quote process:
• Your company assembles affordable washing machines from purchased parts. Your
customers buy in bulk from you and then relabel the washing machines with their own
brand. Customers typically want unique features for their washers, and they often submit
a request for new features or other design changes, which results in a new model being
created. Customers initiate the new design process by submitting a request for quotation
(RFQ), which is a document that provides all the details for the new washing machine
model, including the quantity to be ordered. Your company responds to the RFQ with a
written quote, which details the cost for an order that would meet the requirements of
the RFQ. Many different departments, as well as the manufacturers of the washing
machine component parts, are involved in creating the quote. The Sales Department
must work closely with the Costing Department, the Procurement Department, and the
Assembly Department to provide a competitive quote to the customer. Create a swimlane
flowchart to document the flow of information between departments and external
partners in creating the quote, using the following information:

• The following internal departments are involved in the RFQ process:

• Sales—Receives the customer’s request for a price quote; creates the final quote and
sends it to the customer.

• Assembly—Prepares production documents that detail the labor, tools, and equipment
required to produce the new washing machine.

• Procurement—Creates RFQs for vendors for any new components needed for the new
design.

• Costing (Accounting)—Computes the final cost estimate.

• The following external parties are involved in the RFQ process:

• Customer—Submits a request for a price quote; receives the completed RFQ.

• Vendor—Receives the request for a quote on the cost of component parts, computes
their costs, and submits a bid

A process map is used to describe a process, depicting the steps or activities involved in a
process and people indulged in performing those activities. A RFQ process usually includes a
customer and a company. Three key steps in a RFQ process are its proposal, response, and
finalization of purchase order.

A swim lane flowchart is used for division of a process or certain information into categories. Its
purpose is to categorize or differentiate responsibilities and task sharing between departments
as well as external partners for a specific process of business.

Explanation:

A process map for the given RFQ process is as follows

A swim lane flowchart to document the flow of information between departments and external
partners in creating the quote:
3/ Develop a swimlane process map for the online ordering process for Active Bicycle
Company, shown below. Each of the following functions should be one swimlane: sales,
accounting, warehouse, and shipping.

• The process begins when a customer submits an online order form to Active Bicycle via
the Web. The customer supplies his or her name, address, email address, model number
of the bicycle they desire, and credit card number.

• When the customer clicks on the Confirm button on the Web page, Active Bicycle’s
system gets approval for the transaction from the credit card company. If the credit
charge is approved, the system assigns a number to the sales order, displays an order
summary for the customer to print, and sends a confirmation email to the customer. If
the credit charge is denied, the customer is asked to provide a different form of payment.

• The system then generates a two-part invoice, a stock release form, and a two-part
packing slip form. The stock release form is sent to the Warehouse Department, and the
two-part packing slip and one copy of the invoice are sent to the Shipping Department.
The other copy of the invoice is maintained in a holding file in the Accounting
Department to be filed later with the shipping certificate.

• In the warehouse, employees use the stock release form to pull the appropriate
inventory to fill the order. Assuming there is enough stock (for the purposes of this
exercise you can assume there is enough stock), the bicycle is packed into a special box
for shipping, with added protection so it will not be damaged in transit. Using the stock
release form, the warehouse staff inputs data into the inventory management program to
update the master inventory file. The warehouse clerk also must take the information
from the stock release form and manually fill out a shipping certificate, which is sent to
the Accounting Department for a further check that the items are being released from the
warehouse. The boxed inventory, along with the packing slip, is then sent to the Shipping
Department.

• In the Shipping Department, one copy of the two-part packing slip is placed in the
shipping department’s file cabinet, and one is included with the goods to be sent to the
customer.

• Back in the Accounting Department, the shipping certificate is matched with the copy of
the invoice, and the accounting database is updated to record the completion of the
order. The accounting program then submits a payment request to the credit card
company, and both the shipping certificate and the invoice are filed in the accounting
office
4/ Develop an event process chain (EPC) diagram for the following staff-recruiting process at
Yellow Brook Photography:

• The current recruitment process for Yellow Brook Photography takes approximately 90 days.
It begins when a manager completes a requisition and sends it to the Human Resources
Department. The Human Resources Department reviews and assigns a number to the
requisition and returns it to the manager for approval. He or she approves it, obtains the
required approval signatures, and then returns it to Human Resources.

• Next, Human Resources creates a job posting and announces the position internally through
the company’s intranet, bulletin boards, or a binder of current job openings. Human Resources
collects responses internally for eight days. After that, Human Resources solicits résumés from
external sources by advertising in newspapers and Process Modeling, Process Improvement,
and ERP Implementationonline. Human Resources then prescreens the résumés and forwards
information on qualified candidates to the hiring manager for review. The hiring manager tells
Human Resources which candidates should be interviewed. Human Resources conducts brief
phone interviews of candidates recommended by the hiring manager; if the phone interview is
promising, Human Resources schedules an on-site interview. Candidates interview with the
hiring manager and with a Human Resources staff member. Human Resources records the
interviews in an applicant flow log.

• Once a candidate is selected for hire, Human Resources and the hiring manager prepare an
offer, and a background check on the candidate is initiated. Then, the hiring manager must
approve the offer and obtain the required approval signatures on a job offer approval form.
Subsequently, the hiring manager extends the offer verbally to the candidate, while Human
Resources sends the written offer, including an employment start date. Once the applicant
accepts the offer, a drug screening is scheduled for the candidate, who must also sign the offer
letter and return it to Human Resources. At that point, Human Resources notifies the hiring
manager of the candidate’s acceptance. Finally, if the drug test comes back negative, the new
employee completes new-hire orientation on the first day of work
Event Process Chain (EPC) Diagram For Staff-recruiting process at Yellow Brook Photography

Complete
requisition

Requisition completed Human Resources

Review
Requisition

Requisition Approved Manager

Required Approval
Signature

Signature Approved

Create job posting

Responses collected Human Resource

Solicits resume

Resume solicited Human Resource

1
 1

Pre-screens
resume

Review Resume Human Resource

Candidate Not Candidate

Acceptable Acceptable

Phone Interview Human Resource

Candidate not
Candidate promising
promising

Hiring Manager

Interview candidate

Human Resource

Interview Completed

Record Interview

Interview Recorded

1
 1

Human Resource

Select Candidate

Manager

Candidate Selected

^
Prepare Offer Human Resource Background Checked

X
Offer prepared

Background
Approve offer Background
Manager check
check successful
unsuccessful

Offer Approved

Obtain Signature Manager

Offer Signed

Obtain Signature Extend verbal job

Human Resource Manager
offer

1
 1

Offer accepted

^
Drug screening Notify hiring
scheduled Human Resource manager

Drug screening Drug screening

positive negative

Employee complete
orientation

Hiring complete