ERP Systems and Processes
o Determining pricing
 Enterprise Resource Planning (ERP) programs:
Core software used by companies to coordinate
information in every area of business.
o Help manage companywide business processes.
o Use common database and shared management
reporting tools.
 Business process: Collection of activities that takes
some input and creates an output that is of value to
the customer.
Functional Areas and Business Processes
 The key role of an ERP system is to provide support
for business functions
 To understand ERP, you must understand how a
business works
o Functional areas of operation
o Business processes
 Functional Areas of Operation
o Marketing and Sales (M/S)
o Supply Chain Management (SCM)
o Accounting and Finance (A/F)
o Human Resources (HR)
 Business functions: Activities specific to a
functional area of operation
ERP Modules
 ERP vendors, including SAP, Oracle, and Microsoft,
etc. provide modules that support the major
functional areas of a business.
 The ERP software embeds best business practices
that implement the organization’s policy and
produce via business rules.
ERP Modules from Three Vendors
Marketing and Sales
 Functions of Marketing and Sales
o Advertising and Marketing products
o Promoting products to customers
o Taking customers’ orders
o Helping create a sales forecast
o Customer support
o Customer Relationship Management
 Needs information from all other functional areas
 Customers communicate orders to M/S in person or
by telephone, e-mail, fax, the Web, etc.
 M/S has a role in determining product prices
o Pricing might be determined based on a
product’s unit cost, plus some percentage
markup
o Requires information from Accounting and
Finance, and Supply Chain Management data
 Marketing and Sales needs to interact with Human
Resources to exchange information on hiring needs,
legal requirements, etc.
 The Marketing and Sales functional area exchanges
data with customers and with the Human Resources,
Accounting and Finance, and Supply Chain
Management functional areas.
 Inputs for M/S
o Customer data
o Order data
o Sales trend data
o Per-unit cost
o Travel expense company policy
 Outputs for M/S
o Sales strategies
o Product pricing
o Employment needs
Supply Chain Management
 Functions within Supply Chain Management
o Making the product (manufacturing/production)
o Buying raw materials (purchasing)
o Receiving goods and raw materials
o Transportation and logistics
o Scheduling production of products
o Plant maintenance
 Needs information from various functional areas
 Production plans based on information about
product sales (actual and projected) that comes from
Marketing and Sales
o Sales forecasts: Analyses that attempt to predict
the future sales of a product
 With accurate data about required production levels:
o Raw material and packaging can be ordered as
needed
o Inventory levels can be kept low, saving money
 Supply Chain Management data and records can:
o Provide data needed by Accounting and
Finance to determine how much of each
resource was used
o Support the M/S function by providing
information about what has been produced and
shipped
 Supply Chain Management interacts in some ways
with Human Resources
 The Supply Chain Management functional area
exchanges data with suppliers and with the Human
Resources, Marketing and Sales, and Accounting
and Finance functional areas.

Inputs for
SCM
o Product sales data
o Production plans
o Inventory levels
o Layoff and recall company policy
 Outputs for SCM
o Raw material orders
o Packaging orders
o Resource expenditure data
o Production and inventory reports
o Hiring information
Accounting and Finance
 Functions within Accounting and Finance
o Recording raw data about transactions
(including sales), raw material purchases,
payroll, and receipt of cash from customers,
planning & budgeting, cost allocation & control
 Raw data: Numbers collected from those
operations, without any manipulation, calculation,
or arrangement for presentation
 Data from Accounting and Finance used by
Marketing and Sales and Supply Chain Management
o Sales records are important component of
sales forecast
o Sales forecast is used in making staffing
decisions and in production planning
o Records from accounts receivable used to
monitor the overall credit-granting policy
 Needs information from all other functional areas
 A/F personnel:
o Record company’s transactions in the books of
account
o Record accounts payable when raw materials
are purchased and cash outflows when they
pay for materials
o Summarize transaction data to prepare reports
about company’s financial position and
profitability
 People in other functional areas provide data to A/F
o M/S provides sales data
o SCM provides production and inventory data
o HR provides payroll and benefit expense data
 M/S personnel require data from A/F to evaluate
customer credit
 The Accounting and Finance functional area
exchanges data with customers and with the
Human Resources, Marketing and Sales, and Supply
Chain Management functional areas.
 Inputs for A/F o Employee training and certification
o Payments from customers o Skills database
o Accounts receivable data o Employee evaluation and compensation
o Accounts payable data  Production
o Sales data o Helps in the planning and optimizing of the
o Production and inventory data manufacturing capacity, parts, components, and
o Payroll and expense data material resources using historical production
 Outputs for A/F data and sales forecasting.
o Payments to suppliers  Purchasing
o Financial reports o Streamlines the procurement process of
o Customer credit data required raw materials and other supplies.
 Inventory Management
Human Resources o Facilitates the processes of maintaining the
appropriate level of stock in a warehouse.
 Functions of Human Resources
o Recruit, train, evaluate, compensate employees,  Miscellaneous Modules
o Nontraditional modules such as business
benefits, government compliance
intelligence, self-service, project management,
 HR uses sales forecasts developed by the individual
and e-commerce.
departments to plan personnel needs
 Systems integrated using ERP software provide the Functional Area Information System
data sharing necessary between functional areas
 HR needs information from the other departments  Potential inputs and outputs for each
 Tasks related to employee hiring, benefits, training, functional area described next
and government compliance are all responsibilities  Note the kinds of data needed by each area and
of HR how people use the data
 HR needs accurate forecasts of personnel needs from
all functional units  Information systems maintain relationships
 HR needs to know what skills are needed to perform between all functional areas and processes
a particular job and how much the company can  Significant amount of data is maintained by
afford to pay employees and shared among the functional areas
 Observing governmental regulations in recruiting,
training, compensating, promoting, and terminating  Timeliness and accuracy of these data
employees critical to each area’s success and to
company’s ability to make a profit and generate
 The Human Resources functional area exchanges
future growth
data with the Accounting and Finance, Marketing
and Sales, and Supply Chain Management functional  ERP software allows all functional areas to share a
areas common database
o Allows accurate, real-time information to be
available
Components of the Enterprise System Architecture
 Functional
o Defines the ERP modules that support the various
business functions of the organization. Examples
include:
o Accounting
o Human
Resources
o Procurement
o Fulfillment
o Etc.
 Inputs for HR  System
o Personnel forecasts o Defines the
o Skills data ERP architecture through the physical
 Outputs for HR components of hardware, software, and
o Regulation compliance networking angle.
Enterprise Systems Architecture
 Architecture helps implementation teams to
understand in detail the features and components of
the enterprise system.
 Provide a visual representation of the complex
system interfaces among the ERP application and
databases, operating systems, legacy applications,
and networking.
 Management can develop a better IT plan if the Example of Architecture of ERP at Large
requirements for system infrastructure, training, University
change management, and business process
reengineering are clarified.
Three-Tier Architecture

 Most of the current ERP implementations follow a

three- tiered architecture, which consists of a Web
tier, an application tier, and a data tier.
 Benefits
o Scalability - Easier to add, change, and
remove applications.
o Reliability - Implementing multiple levels of
redundancy. WebLine ERP Architecture
o Flexibility - Flexibility in partitioning is very
simple.
o Maintainability - Support and maintenance
costs are less on one server.
o Reusability - Easier to implement reusable
components.
o Security - IT staff has more control system to
provide higher security.
 Limitations
o Can be very expensive and complex.
Tiers
 The Web Tier
o Web-based portal allows users the ability to
access and analyze information through their
Web browser.  Business Logic Layer: Layered architecture
 The Application Tier
o Consists of a Web browser and reporting tool
where business
 processes and end-users interact with the
system.
o It shields the business users from the inner
workings of an ERP system, but still
provides the information relevant to
their job and business process.
 The Data Tier
o Focus is on structure of all organizational
data and its relationships with both internal
and external systems.
A Three-Tier ERP Architecture SAP-Sales and Distribution
 The diagram shows sub-functionality for Sales and
 Distribution module. Diagram shows individual
business activities within each sub-functionality
and flow of those activities.

SAP-Order Management Process

 The diagram shows step-by-step activities for
Order Management Business process. Diagram also
shows modules and sub-functionality support
activities in the business process.