Process Integration Chapter 9 1 Magal and Word | Integrated
Business Processes with ERP Systems | 2011
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Learning Objectives 1. Define process integration, and explain
why this concept is fundamental to modern business operations. 2.
Explain how the procurement, fulfillment, and IWM processes
interact when a company fills a customer order for trading goods.
3. Indentify and discuss the various integration points among the
procurement, fulfillment, production, and warehouse management
processes. 4. Analyze the financial and material impacts of the
various steps in the integrated processes. 2 Magal and Word |
Integrated Business Processes with ERP Systems | 2011
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Background Thus far the book has covered the following key
processes: Financial accounting Procurement Fulfillment Production
Inventory and warehouse management Material planning Each of these
processes has triggers, data, tasks, and outcomes Magal and Word |
Integrated Business Processes with ERP Systems | 2011 3
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Background Chapter 1 introduced the concept of process
integration Various processes are interdependent Steps in one
process frequently impact steps in other processes This chapter
approaches the same processes discussed in the previous chapters
but from an integrative perspective. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 4
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Integrated Business Processes Magal and Word | Integrated
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Background Production strategies Make-to-stock Make-to-order
Procurement strategy Procure-to-stock Procure-to-order Fulfillment
strategy Sell-from-stock Magal and Word | Integrated Business
Processes with ERP Systems | 2011 6
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Background Make-to-stock, procure-to-stock, and sell-from-stock
strategies use inventory as a buffer between processes to de-couple
them or make them less dependent on one another. To illustrate
integration among processes, the scenarios will no longer assume
that there is a sufficient inventory of raw materials for
production or of finished goods for fulfillment. The discussion
will focus on the make-to-order and procure-to- order strategies.
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Background Two scenarios are presented Scenario one - Filling a
customer order for trading goods Procurement, fulfillment, IWM
Scenario two Filling a customer order for finished goods
Procurement, fulfillment, production, IWM Magal and Word |
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Procurement, Fulfillment, and IWM Processes Rocky Mountain
Bikes (RMB), a GBI customer, has ordered 800 t-shirts (SHRT1000)
from GBI GBI will ship the t-shirts from its San Diego plant, which
is warehouse management enabled Assumptions The San Diego plant has
200 t-shirts in stock valued at a moving average price of $15.43
each The Miami plant has 1,500 t-shirts in stock valued at a moving
average price of $15.25 each GBI can purchase t-shirts from Spy
Gear at $14.95 each Magal and Word | Integrated Business Processes
with ERP Systems | 2011 9
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Procurement, Fulfillment, and IWM Processes Assumptions
(continued) RMB has sent GBI a purchase order (PO) for 800 t-shirts
GBI sells t-shirts for $30 each Magal and Word | Integrated
Business Processes with ERP Systems | 2011 10
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Plant Stock Valuation Start of the Process Magal and Word |
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Account Balance - Start of the Process Magal and Word |
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Demo 9.1 Review Financials and Inventory (Plant, Storage
Location, and Bin Stock and Value) Review financials and inventory
(plant, storage location, and bin stock and value) Magal and Word |
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Demo 9.2 Create Two Customer Orders Review creation of two
customer orders Magal and Word | Integrated Business Processes with
ERP Systems | 2011 14
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Procurement, Fulfillment, and Warehouse Management Processes
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Fulfillment Process - Initial Steps The fulfillment process is
triggered by a customer purchase order. Fulfillment continues with
the next step, which is sales order processing. Magal and Word |
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Fulfillment Process Initial Steps Magal and Word | Integrated
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Procurement Process Initial Steps A shortage of materials
creates a requirement for GBI to purchase trading goods, which
triggers the procurement process. Two options for procurement:
Internally Externally Magal and Word | Integrated Business
Processes with ERP Systems | 2011 18
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Procurement Process Initial Steps Magal and Word | Integrated
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Demo 9.3 Create Two Requisitions and POs to Fill Customer
Orders Review the creation of two requisitions and POs Magal and
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Procurement Process Internal Procurement San Diego plant can
procure the t-shirts from the Miami plant STO processing has
several options Select STO without delivery document Goods issue
Material impact Financial impact Valuation impact Goods receipt
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Procurement Process Internal Procurement Magal and Word |
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Material and FI Documents at GI for STO Magal and Word |
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Plant Stock Valuation at GI for STO Magal and Word | Integrated
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Account Balances at GI for STO Magal and Word | Integrated
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Material and FI Documents at GR for STO Magal and Word |
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Plant Stock Valuation at GR for STO Magal and Word | Integrated
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Demo 9.4 Internal Procurement for First PO Review internal
procurement for first PO Magal and Word | Integrated Business
Processes with ERP Systems | 2011 28
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Procurement Process External Procurement GBI sends a purchase
order for 1,000 t-shirts to Spy Gear. Followed by: Goods receipt
Invoice receipt Payment Impacts Material impact FI impact Plant
stock valuation Magal and Word | Integrated Business Processes with
ERP Systems | 2011 29
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Procurement Process External Procurement Magal and Word |
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Material and FI Documents at GR for PO Magal and Word |
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Plant Stock Valuation at GR for PO Magal and Word | Integrated
Business Processes with ERP Systems | 2011 32
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Account Balances at GR for PO Magal and Word | Integrated
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Account Balances after Procurement Magal and Word | Integrated
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Demo 9.5 External Procurement for Second PO Review external
procurement for second PO Magal and Word | Integrated Business
Processes with ERP Systems | 2011 35
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Warehouse Management Steps Related to Procurement San Diego
plant is WM enabled WM steps: TR/TO No material or FI documents
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WM Steps Related to Procurement Magal and Word | Integrated
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Demo 9.6 WM Steps for Goods Receipt for PO Review WM steps for
goods receipt for PO Magal and Word | Integrated Business Processes
with ERP Systems | 2011 38
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Fulfillment Process - Shipping Create delivery WM steps for
picking Goods issue Invoice Payment Magal and Word | Integrated
Business Processes with ERP Systems | 2011 39
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Fulfillment Process - Shipping Magal and Word | Integrated
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Demo 9.7 Create Delivery for PO Review create delivery for PO
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WM Steps Related to Fulfillment Magal and Word | Integrated
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Demo 9.8 WM Steps for Delivery Review WM steps for delivery
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Fulfillment Process Concluding Steps Magal and Word |
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Material and FI Documents for Delivery Magal and Word |
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Plant Stock Valuation at GI for Delivery Magal and Word |
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Account Balances after GI for Delivery Magal and Word |
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GL Account Balances after Customer Billing and Payment Magal
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Demo 9.9 Complete Fulfillment Review complete fulfillment Magal
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Procurement, Fulfillment, Production, and IWM Processes Rocky
Mountain Bikes (RMB) has ordered 40 Red Deluxe Touring Bikes
(DXTR3000) from GBI. Assumptions The San Diego plant has 10 Red
Deluxe Touring Bikes valued at a standard price of $1,400 each. The
Dallas plant currently does not have any touring bikes in
inventory. When it does have these bikes, the standard price is
also $1,400. The Dallas plant has 200 aluminum wheel assemblies
that are needed to produce touring bikes. The standard price for
these wheel assemblies is $110. Magal and Word | Integrated
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Procurement, Fulfillment, Production, and IWM Processes
Assumptions (continued) GBIs vendor -- Space Bike Composites -- is
able to supply all of the raw materials needed to make touring
bikes. GBI purchases raw materials in lot sizes of 200. It produces
bikes in lot sizes of 50. RMB has sent GBI a purchase order for 40
Red Deluxe Touring Bikes. GBI sells these bikes for $2,800 each.
Bikes are produced in Dallas and shipped to San Diego via STO Magal
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BOM for Touring Bikes Magal and Word | Integrated Business
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Raw Material Cost per Bike Magal and Word | Integrated Business
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Plant Stock Valuation at Start of Process Magal and Word |
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Account Balances Start of Process Magal and Word | Integrated
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Procurement, Fulfillment, Production, and Warehouse Management
Processes Magal and Word | Integrated Business Processes with ERP
Systems | 2011 56
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Demo 9.10 Review Financials and Inventory (Plant, Storage
Location, and Bin Stock and Value) Review financials and inventory
(plant, storage location, and bin stock and value) Magal and Word |
Integrated Business Processes with ERP Systems | 2011 57
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Fulfillment Process Initial Steps This following scenario for
the fulfillment process is very similar to the one that was
previously discussed. RMBs purchase order triggers the integrated
process and prompts GBI to create a sales order. The ERP system
performs an availability check. Magal and Word | Integrated
Business Processes with ERP Systems | 2011 58
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Fulfillment Process Initial Steps Magal and Word | Integrated
Business Processes with ERP Systems | 2011 59
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Demo 9.11 Create a Sales Order Review create a sales order
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Inventory Management (STO) Initial Steps Availability check
results in a deficit. Bikes are produced in Dallas and must be
transferred to San Diego (via STO) Magal and Word | Integrated
Business Processes with ERP Systems | 2011 61
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Inventory Management Initial Step Magal and Word | Integrated
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Demo 9.12 Create an STO Review how to create an STO Magal and
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Production Process Initial Steps Insufficient inventory of
bikes in Dallas to meet the requirements in the STO Execute the
production process Insufficient raw materials to produce the bikes
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Production Process Initial Steps Magal and Word | Integrated
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Demo 9.13 Create a Planned Order and a Production Order Review
how to create a planned order and a production order Magal and Word
| Integrated Business Processes with ERP Systems | 2011 66
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Procurement Process (External) The requirement for raw
materials triggers the procurement process to acquire these
materials. Magal and Word | Integrated Business Processes with ERP
Systems | 2011 67
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Procurement Process (External) Magal and Word | Integrated
Business Processes with ERP Systems | 2011 68
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Plant Stock Valuation after External Procurement Magal and Word
| Integrated Business Processes with ERP Systems | 2011 69
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Account Balances after External Procurement Magal and Word |
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Demo 9.14 Execute the Procurement Process Review how to execute
the procurement process Magal and Word | Integrated Business
Processes with ERP Systems | 2011 71
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Production Process - Continued GBI has received the raw
materials The production process continues Magal and Word |
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Production Process - Continued Magal and Word | Integrated
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Plant Stock Valuation after Production Magal and Word |
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Account Balances after Production Magal and Word | Integrated
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Demo 9.15 Complete Production Review complete production Magal
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Inventory Management - Continued Bikes are received into the
Dallas plant inventory. GI for STO in Dallas GR for STO in San
Diego Magal and Word | Integrated Business Processes with ERP
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Inventory Management - Continued Magal and Word | Integrated
Business Processes with ERP Systems | 2011 78
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Plant Stock Valuation at GI for STO Magal and Word | Integrated
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Account Balances after a Goods Issue against an STO Magal and
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Plant Stock Valuation at GR for STO Magal and Word | Integrated
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Demo 9.16 Complete the GI and GR for STO Review complete GI and
GR for STO Magal and Word | Integrated Business Processes with ERP
Systems | 2011 82
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Warehouse Management Process Related to STO Bikes arrive in the
San Diego plant, which is WM enabled Complete WM steps related to
GR Magal and Word | Integrated Business Processes with ERP Systems
| 2011 83
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Warehouse Management Steps Magal and Word | Integrated Business
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Demo 9.17 Complete WM Steps Related to STO Review complete WM
steps related to STO Magal and Word | Integrated Business Processes
with ERP Systems | 2011 85
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Fulfillment Process - Continued The bikes are now in stock in
the San Diego plant. The fulfillment process, which had been
interrupted, can continue. Magal and Word | Integrated Business
Processes with ERP Systems | 2011 86
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Fulfillment Process - Continued Magal and Word | Integrated
Business Processes with ERP Systems | 2011 87
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Demo 9.18 Create a Delivery for a Sales Order Review how to
create a delivery for a sales order Magal and Word | Integrated
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Warehouse Management Process Magal and Word | Integrated
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Demo 9.19 Complete the WM Steps Related to the Sales Order
Review how to complete the WM steps related to the sales order
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Fulfillment Process Concluding Steps Magal and Word |
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Plant Stock Valuation at GI for SO Magal and Word | Integrated
Business Processes with ERP Systems | 2011 92
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Account Balances after Fulfillment Magal and Word | Integrated
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Demo 9.20 Complete Fulfillment Steps Review how to complete the
fulfillment steps Magal and Word | Integrated Business Processes
with ERP Systems | 2011 94