AIS06 – ENTERPRISE RESOURCE PLANNING AND MANAGEMENT

CHAPTER 1 – BUSINESS FUNCTIONS AND BUSINESS PROCESSES

ENTERPRISE RESOURCE PLANNING PROGRAMS DEFINED
Enterprise Resource Planning (ERP) programs are core software used by companies to
coordinate information in every area of the business. ERP programs help to manage company-
wide business processes, using a common database and shared management reporting tools.
FUNCTIONAL AREAS OF OPERATION – broad categories of business activities.

 Marketing and Sales (M/S)

 Supply Chain Management (SCM)
 Accounting and Finance (A/F)
 Human Resources (HR)

Functional areas are interdependent, each requiring data from the others. 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 those of other functional areas.

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INFORMATION SYSTEM DEFINED

An information system (IS) includes the computers, people, procedures, and software that store,
organize, and deliver information.
BUSINESS PROCESS DEFINED
A business process is a collection of activities that takes one or more kinds of input and creates
an output, such as a report or forecast, which is of value to the customer. The customer for a
business process can be the traditional external customer (the person who buys the finished
product), or it may be an internal customer (such as a colleague in another department). For
example, what is sold through M/S is linked to what is procured and produced by SCM. ERP
software supports the efficient operation of business processes by integrating throughout a
business tasks related to sales, marketing, manufacturing, logistics, accounting, and staffing.

Thinking in terms of business processes helps managers to look at their organization from the
customer’s perspective.
For the computer company to provide customer satisfaction, it must make sure that its functional
areas of operation are integrated. For example, computer technology changes rapidly, and the
hardware the computer company sells changes frequently. In order to provide customers with
accurate information, people performing the sales function must have up-to-date information
about computer configurations; otherwise, a customer might order a computer that the company’s
manufacturing plant no longer produces. People performing the manufacturing function need to
get the details of a customer’s computer configuration quickly and accurately from the employees
performing the sales function, so the right computer can be manufactured and shipped on time to
the customer. If the customer is financing the computer through the computer company, then
people performing the sales order function must gather information about the customer and
process it quickly, so financing can be approved in time to support shipping the computer.
Sharing data effectively and efficiently between and within functional areas leads to more efficient
business processes. Information systems can be designed so that functional areas share data.
These systems are called integrated information systems.

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Businesses take inputs (resources) in the form of material, people, and equipment, and transform
these inputs into goods and services for customers. Managing these inputs and the business
processes effectively requires accurate and up-to-date information. For example, the sales
function takes a customer’s order, and the production function schedules the manufacturing of
the product. Logistics employees schedule and carry out the delivery of the product. If raw
materials are needed to make the product, production prompts purchasing to arrange for their
purchase and delivery. In that case, logistics will receive the material, verify its condition to
accounting so that the vendor can be paid, and deliver the goods to production. Throughout,
accounting keeps appropriate transaction records.
FUNCTIONAL AREAS AND BUSINESS PROCESSES

 Marketing and Sales sets product prices, promotes products through advertising and
marketing, takes customer orders, supports customers, and creates sales forecasts.
 Supply Chain Management develops production plans (based on sales forecast), orders
raw materials from suppliers, receives the raw material into the facility, manufactures
products, maintains facilities, and ships products to customers.
 Accounting and Finance performs financial accounting to provide summaries of
operational data in managerial reports, and also is responsible for tasks such as
controlling accounts, planning and budgeting, and cash-flow management.
 Human Resources recruits, hires, trains, and compensates employees, ensures
compliance with government regulations, and oversees the evaluation of employees.
FUNCTIONAL AREA INFORMATION SYSTEMS
Marketing and Sales
Inputs: Customer data, order data, sales trend data, per-unit cost, travel expense company policy
Outputs: Sales strategies, product pricing, employment needs

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Supply Chain Management

Inputs: Product sales data, production plans, inventory levels, lay off and recall company policy
Outputs: Raw material orders, packaging orders, resource expenditure data, production and
inventory reports, hiring information

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Accounting and Finance

Inputs: Payments from customers, accounts receivable data, accounts payable data, sales data,
production and inventory data, payroll and expense data
Outputs: Payments to suppliers, financial reports, customer credit data

Human Resources
Inputs: Personnel forecasts, skills data
Outputs: Regulation compliance, employee training and certification, skills database, employee
evaluation and compensation

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