Lecture 9-10

Graduate Program in Business Information Systems

BIS 581 Business Process Management

Lectures 9-10

Aslı SencerDepartment of Management Information

Systems

Business Process Management – 9-10

Integration with ERP Systems

Outline

Magal and Word ! Essentials of Business Processes and Information Systems | © 20093

• Types of Enterprises Systems• Types of Data in ES• SAP Overview• Procurement Process• Key Concepts and Assumptions• Conceptual Framework

– Physical Flow– Document and Data Flow– Information Flow– Financial Impact

Enterprise Systems

Magal and Word ! Essentials of Business Processes and

Information Systems | © 20094

• Three stages of evolution– Stage 1: Stand-alone Mainframe Systems– Stage 2: Client-Server Architecture– Stage 3: Service-Oriented Architecture (SOA)

The New Stack – Process Is the Next Platform



Client

Mainframe Client Server SOA

Application

Data Management

Composites

OS and Database OS

DB

Custom

Application

Punch Card or Terminal(10’s of users)

Application

OS

PC or Internet (1000’s of users)

Application

OS

Application

OS

Any Device (Millions of users)

OSOS

DB

OS

DB

OS

DBOS

DB

OS

DB

OS

DB OSOS

DB

OS

DB

OS

DB

OS

Composites

OSOSApplications

OS

OSOS

OSApplications

OS

3-tier Client Architecture



ApplicationServer

ClientClient

Client

Client

ClientClient

ClientClient

Client

ApplicationServer

ClientClient

Client

Client

ClientClient

ClientClient

Client

ApplicationServer

ClientClient

Client

Client

ClientClient

ClientClient

Client

Database Server

Types of Enterprise Systems



• The ES Application Suite– Enterprise Resource Planning (ERP)– Supply Chain Management (SCM)– Supplier Relationship Management (SRM)– Product Lifecycle Management (PLM)

• Other classifications– Best of breed vs. Niche applications– Software as a service (SaaS)

ERP Systems• Evolved in 1990’s in parallel to advances in BPR and

globalization.• ERP’s are the world’s largest and most complex ES’s.• Focus on internal operations of an organization, integrate

functional and cross functional (intracompany) business processes.

• Typical ERP systems include– Operations (production)– Human resources– Finance and Accounting– Sales and Distribution– Procurement

8

Management of intercompany processes: SCM and SRM

• SCM connects the companies that supply the materials it needs to make its products.

• SCM help companies plan for their production demand requirements and optimize complex transportation and logistics for materials.

• SRM systems manage the overal relationships with the material suppliers.

• SRM systems contain functonality to manage the quotation and contracts processes.

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CRM and PLM• CRM systems connect a company’s ERP system to those of its

customers. • CRM systems provide companies with capabilities to manage

marketing, sales and service for its customers.• PLM systems help companies administer the process of

research, design and product management.

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The application suite



Example: SAP, Oracle

SAP ERP Solution Map



Shared Service Delivery

SAP NetW

eaver

End-User Service Delivery

Analytics Financial Analytics Operations Analytics Workforce Analytics

FinancialsFinancial Supply Chain Management

Treasury Financial Accounting

Management Accounting

Corporate Governance

Human Capital Management Talent Management Workforce Process

Management Workforce Deployment

Procurement and Logistics Execution Procurement

Inventory and Warehouse Management

Inbound and Outbound Logistics

Transportation Management

Product Development and Manufacturing

Production Planning Manufacturing Execution Product Development Life-Cycle Data

Management

Sales and Service Sales Order Management Aftermarket Sales and Service Professional-Service Delivery

Corporate ServicesReal Estate Management

Enterprise Asset Management

Project and Portfolio Management

Travel Management

Environment, Health, and Safety Compliance Mgmt.

Quality Management

Global Trade Services

Copyright SAP AG 2008

SAP Supply Chain Management



SAP NetW

eaver

Demand & Supply Planning

Demand Planning & Forecasting

Safety Stock Planning

Supply Network Planning

Distribution Planning

Service Parts Planning

Procurement Strategic Sourcing Purchase Order Processing Invoicing

Manufacturing Production Planning & Detailed Scheduling

Manufacturing Visibility & Execution & Collaboration MRP based Detailed Scheduling

WarehousingInbound Processing & Receipt Confirmation

Outbound Processing Cross Docking Warehousing &

Storage Physical Inventory

Order Fulfillment Sales Order Processing Billing Service Parts Order Fulfillment

Transportation Freight Management

Planning & Dispatching

Rating & Billing & Settlement

Driver & Asset Management

Network Collaboration

Real World Awareness Supply Chain Event Management Auto ID / RFID and Sensor Integration

Supply Chain Visibility

Strategic Supply Chain Design Supply Chain Analytics Supply Chain Risk

ManagementSales & Operations Planning

Supply Network Collaboration Supplier Collaboration Customer Collaboration Outsourced Manufacturing

Supply Chain Management with Duet

Demand Planning in MS Excel


SAP Supplier Relationship Management



SAP NetW

eaver

Purchasing Governance Global Spend Analysis Category Management Compliance Management

Sourcing Central Sourcing Hub RFx / Auctioning Bid Evaluation & Awarding

Contract Management

Legal Contract Repository Contract Authoring Contract

Negotiation Contract Execution Contract Monitoring

Collaborative Procurement

Self-Service Procurement Services Procurement Direct / Plan-Driven

ProcurementCatalog Content Management

Supplier Collaboration Web-based Supplier Interaction Direct Document Exchange Supplier Network

Supply Base Management

Supplier Identification & Onboarding

Supplier Development & Performance Management Supplier Portfolio Management


SAP Product Lifecycle Management



SAP NetW

eaver

Product Management

Product Strategy and Planning

Product Portfolio Management

Innovation Management

Requirements Management

Market Launch Management

Product Development and Collaboration

Engineering, R&D Collaboration

Supplier Collaboration

Manufacturing Collaboration

Service and Maintenance Collaboration

Product Quality Management

Product Change Management

Product Data Management

Product Master and Structure Management

Specification and Recipe Management

Service and Maintenance Structure Management

Visualization and Publications

Configuration Management

PLM Foundation Product Compliance

Product Intelligence Product Costing

Tool and Workgroup Integration

Project and Resource Management

Document Management


SAP Customer Relationship Management



Web Channel

Interaction Center

Partner Channel M

anagement

Trade Promotion

Managem

ent

Business Comm

unication M

anagement

Marketing Marketing Resource Management

Segmentation & List Management

Campaign Management

Real-Time Offer Management Lead Management

SalesSales Planning & Forecasting

Sales Performance Management

Territory Management

Accounts & Contacts

Opportunity Management

Quotation & Order Management

Pricing & Contracts

Incentive & Commission Management

Time & Travel

ServiceService Order Management

Service Contract Management

Complaints & Returns

In-House Repair

Case Management

Installed Base Management

Warranty Management

Resource Planning


Other classifications of ERP systems



Today’s global comanies typically have an ES lanscape that includes custom and packaged applications from several vendors • Best of Breed Applications: Isolated to one process or part of a process that

evolves from departmental applicationsEx: i2 is a popular SCM system. Ariba is a popular procurement system.

• Niche applications: Small and independent software vendors offer highly specialized niche app’s.Ex: Vendova is a small ISV that produces a pricing management tool to assist retailers in maximizing profit for retail sales. It pulls product and price info from several ES’s.

• Other classifications:– Size of enterprise: SAP and Oracle for companies with more than 1000 employees– Method of delivery: Install the hardware and software in the facility (three-tier or

SOA configurations) versus salesforce.com and Netsuite deliver ES entirely from web.

Types of Data in ES



• Organizational Data• Master Data• Transaction Data

Organizational Data



• Define the organizational structure of the enterprise• Includes definitions of:

– Companies (subsidiaries, etc.)– Divisions based on, product or geographical hierarchy– Sales organizations– Purchasing organizations– Physical facilities: plants, warehouses, distribution centers– HR organization: Functional areas, reporting relationships

• Data rarely changes

Master Data



• Define key entities in an organization• Customers

– Basic information: name, address, contact information– Financial information: payment terms, methods– Sales information: delivery terms

• Vendors / suppliers– Similar information as customer

• Products– Basic data: description, weight, color– Purchasing data– Sales data– Manufacturing data

Master Data



• Employees– Basic data– Personal data: dependents– Payroll data– Tax data

• Data changes occasionally

Transaction Data



• Data that is the consequence of day-to-day transaction– Who, what, when, where, how, how much

• Sales– Customer, products, quantities, dates and times, location

(shipping, delivery), sales person• Purchase

– Vendor, products, quantities, dates and times, location (delivery), sales person, requester

• Production– Materials, quantities, facilities, resources (machine, people),

dates and times, locations (storage, production)

Super Skateboard Builders, Inc.



• History• Product Line• Customers• Vendors• Plant Layout• Employees• Information Systems

SSB, Inc. - Product List



PRODUCT NUMBER PRODUCT DESCRIPTION

STANDARD PRICE(MANUFACTURING OR

PURCHASE COST)WHOLESALE

PRICE MSRP

DXSB1000 DELUXE SKATEBOARD $58.00 $96.00 $160.00

STSB2000 STANDARD SKATEBOARD $40.00 $66.00 $110.00

ENSB3000 ENTRY-LEVEL SKATEBOARD $34.00 $45.00 $75.00

HLMT5000 HELMET $20.00 $27.00 $45.00

SHRT4000 T-SHIRT $7.00 $10.00 $16.00

FAID6000 SKATEBOARD FIRST AID KIT $10.00 $16.00 $27.00

SSB, Inc. - Customer List



CUSTOMERNUMBER NAME ADDRESS CITY STATE ZIP

1 WORLD WIDE SKATEBOARD DISTRIBUTORS 1229 MAIN STREET ANN ARBOR MI 48109

2 EXTREME SKATEBOARD SPORTS, INC. 5000 RENSELLEAR AVE DETROIT MI 48202

3 "WALDO" AUTRY 3012 HASLETT ROAD LANSING MI 48906

4 SPORTING GOODS, INC. 6903 28TH STREET GRAND RAPIDS MI 49508

5 FLYING ACROBATS, INC. 274 ADAMS STREET HOLLAND MI 49423

6 MI SPORTING COMPANY 3000 ALPINE AVE GRAND RAPIDS MI 49544

7 DAWGS 4005 STATE STREET SE SAGINAW MI 48710

SSB, Inc. - Vendor List



VENDORNUMBER VENDOR NAME CITY STATE ZIP MATERIALS SUPPLIED

100000 NUTCASE SUPPLIES GRAND RAPIDS MI 49525 NUTS, BOLTS

100001 SKATELUBBERS, INC. GRAND RAPIDS MI 49525 FIRST AID KIT, T-SHIRT, HELMET

100002 GRAND SKATEBOARD SUPPLIES GRAND RAPIDS MI 49525

TRUCKS, RISER PADS, GRIP TAPE, DECKS, ENTRY LEVEL SKATEBOARD, FIRST AID KIT

100003 BLACK WIDOW SKATEBOARDS, INC. HOLLAND MI 49424 ENTRY LEVEL SKATEBOARD,

FIRST AID KIT, T-SHIRT, HELMET

100004 SPOTTED OWL LUMBER CASCADE MI 49546 MAPLE PLY, ENTRY LEVEL SKATEBOARD

100005 VAN GO PAINT SUPPLIES KENTWOOD MI 49508 SEALERS, PAINTS

100006 THE DUTCH MONSTER GRAND RAPIDS MI 49504 BOXES, LABELS, GLUE

100007 WHITEWATER DEVELOPMENT COMPANY JONESBORO AR 72401 BUILDING SPACE

SSB, Inc. - Plant Layout



SSB, Inc. - Organizational Chart



John Z. Boeve (President)

Maria Rivera (Office Manager)

Catherine VanderBos (Plant Manager)

Charles Skivers (Shop Floor)

Mark McKendry (Shop Floor)

Patrick Stevens (Sales Manager)

Shana Smith (Accountant)

David Bloomberg (Warehouse Manager)

Tom Jones (Warehouse)

Martha Seward (Purchasing Manager)

SAP Overview




Magal and Word | Essentials of Business Processes and Information Systems | © 2009

Physical Flow

30

• What is the trigger?• What are the steps? • What is the purpose of each step?• Who is involved in each step?• How is communication and coordination

accomplished



Procurement Process: Physical Flow

Document flow



• Purchase Requisition• Purchase Order• Packing List• Goods Receipt Document• Vendor Invoice and Payment• Key questions regarding documents

– What is the purpose?– What are the key data?

• General: Who, when, what, where• Process / step specific: varies

– How does data change across the process?– Who is responsible for the data?

Magal and Word ! Essentials of Business Processes and Information Systems | © 2009

33

Purchase Requisition

Filled later by the purchasing department, based on the purchase order form.

Purchase Order



Free-on-board (F.O.B ) point is the point at which ownership of the shipped material legally transfers from one company to the other. F.O.B. Point is either the shipping point or the destination.

Payment Terms define how the company will pay the vendor.Net nn: nn specifies the number of days within which payment for the full amount of the invoice is due.x% mm/Net nn: x% discount is made if the payment is made within mm days; otherwise, full payment should be made within nn days.

Materials may be shipped via ground shipment (trucs, etc.), air, train, sea.

Packing List



When the vendor sends the shipment, a packing list or delivery document will accompany it, showing the details about the materials in the shipment.It does not include pricing information.

A Goods Receipt Document



A Vendor Invoice



Once the shipment is sent, the vendor will send an invoice, or bill for the material shipped to the accounting department for payment. Three-way match: The corresponding purchase order document, goods receipt document and invoice are matched.If the match is OK, the payment is made by check or Electronic funds transfer (EFT)

Note of the Accounting Manager after the payment is made:Paid in fullCheck # 258468/1/08

Information Flow



• Instance-Level Information– Status of a purchase requisition / order– Has a requisition been acted on? Has a PO been created and sent– Have goods been received for the requisition / order? When? Where are

the goods?– If received, has an invoice been received? Paid?– If not received, when can we expect the goods?Ex: David wants to know the state of the purchase requisition he sent to Martha

• Process-Level Information – How well is the process doing?– How much time does it take on average? Per material? Per vendor?– Which vendors are prompt? Who habitually delivers late?– What do we buy most often? From with vendor(s)?


Financial Impact

39

• Impact on balance sheet and income statement accounts

• Example: Procure $500 in materials.Process step B/S I/S

Purchase requisition

Purchase order

Goods receipt

Vendor Invoice receiptVendor payment

Role of enterprise systems in the procurement process



• Execute the Process– Create Purchase Requisition– Create Purchase Order– Receive Shipment– Receive Invoice and Send Payment

• Capture and Store Process Data• Monitor the Process

– Instance-Level Information Flow– Process-Level Information Flow

Enterprise systems in Procurement



Purchase Requisition in SAP



Purchase Order in SAP



Goods Receipt in SAP



Invoice Receipt in SAP



Vendor Payment in SAP – Initial Screen



Vendor Payment in SAP – Processing




Process monitoring (Information flow)

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• Instance level – status information– Status of a purchase requisition / order (PO

history)• Process level – aggregate information

– How is the process doing?

Purchase Requisition History



Purchase Order History



Process-Level Information



Exercise Using Simulated SAP



• The exercises will require you to complete the steps in the procurement process that have been discussed in this chapter. In particular you will:– Create a purchase requisition for a number of trading

goods– Convert the requisition to a purchase order– Enter a goods receipt into the system– Enter a vendor invoice into the system– Record a payment to the vendor

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Lecture 9-10

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