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ERP Systems and Processes

Dr. Amor Lazzez

Office location: Tarbia Campus (C/ 306)

Phone: 0549071465 (cell)
Email: a.lazzez@gmail.com

502510-3/Systems-Integration
Week 5
Source: Concepts in Enterprise Resource Planning Textbook, Chapters 1 to 6 and Enterprise Systems for Management
textbook, chapter 3.

Introduction

• Enterprise Resource Planning (ERP) programs:

Core software used by companies to coordinate
information in every area of business
– Help manage companywide business processes
– 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

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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
– Functional areas of operation
– Business processes
• Functional Areas of Operation
– Marketing and Sales (M/S)
– Supply Chain Management (SCM)
– Accounting and Finance (A/F)
– 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 procedure via
business rules.

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ERP Modules From Three Vendors

Function SAP Oracle/ PeopleSoft Microsoft Dynamics
Sales Sales and Distribution, Sales Marketing and Sales, Retail POS, Field
Opportunity Supply Chain Service
Management Management
Procurement Purchasing, Supplier Procurement and Supply Chain
Relationship Management Supplier Relationship Management
Management
Production MRP, Product Life Cycle Manufacturing Manufacturing
Management
Accounting Financial Accounting Financial Management Financial
Management
Distribution Warehouse Management Supply Chain Distribution
Management Management
Customer CRM CRM CRM
Service
Corporate Governance, Risk, and Corporate Performance Analytics
Performance Compliance Management Management
& Governance
Human Human Capital Management Human Capital HR Management
Resources Management

Marketing and Sales

• Functions of Marketing and Sales

– Advertising and Marketing products
– Determining pricing
– Promoting products to customers
– Taking customers’ orders
– Helping create a sales forecast
– Customer support
– Customer Relationship Management

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Marketing and Sales

• 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
– Pricing might be determined based on a product’s unit
cost, plus some percentage markup
– 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.

Marketing and Sales

The Marketing and Sales functional area exchanges data with customers and
with the Human Resources, Accounting and Finance, and Supply Chain
Management functional areas

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Marketing and Sales

• Inputs for M/S

– Customer data
– Order data
– Sales trend data
– Per-unit cost
– Travel expense company policy
• Outputs for M/S
– Sales strategies
– Product pricing
– Employment needs

Supply Chain Management

• Functions within Supply Chain Management

– Making the product (manufacturing/production)
– Buying raw materials (purchasing)
– Receiving goods and raw materials
– Transportation and logistics
– Scheduling production of products
– Plant maintenance

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Supply Chain Management

• Needs information from various functional areas
• Production plans based on information about product sales
(actual and projected) that comes from Marketing and Sales
– Sales forecasts: Analyses that attempt to predict the future sales of a
product
• With accurate data about required production levels:
– Raw material and packaging can be ordered as needed
– Inventory levels can be kept low, saving money
• Supply Chain Management data and records can:
– Provide data needed by Accounting and Finance to determine how
much of each resource was used
– 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

Supply Chain Management

The Supply Chain Management functional area exchanges data with suppliers and
with the Human Resources, Marketing and Sales, and Accounting and Finance
functional areas

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Supply Chain Management

• Inputs for SCM

– Product sales data
– Production plans
– Inventory levels
– Layoff and recall company policy
• Outputs for SCM
– Raw material orders
– Packaging orders
– Resource expenditure data
– Production and inventory reports
– Hiring information

Accounting and Finance

• Functions within Accounting and Finance
– 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
– Sales records are important component of sales forecast
– Sales forecast is used in making staffing decisions and in production
planning
– Records from accounts receivable used to monitor the overall credit-
granting policy

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Accounting and Finance

• Needs information from all other functional areas
• A/F personnel:
– Record company’s transactions in the books of account
– Record accounts payable when raw materials are purchased and
cash outflows when they pay for materials
– Summarize transaction data to prepare reports about company’s
financial position and profitability
• People in other functional areas provide data to A/F
– M/S provides sales data
– SCM provides production and inventory data
– HR provides payroll and benefit expense data
• M/S personnel require data from A/F to evaluate customer
credit

Accounting and Finance

The Accounting and Finance functional area exchanges data with customers
and with the Human Resources, Marketing and Sales, and Supply Chain
Management functional areas

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Accounting and Finance

• Inputs for A/F

– Payments from customers
– Accounts receivable data
– Accounts payable data
– Sales data
– Production and inventory data
– Payroll and expense data
• Outputs for A/F
– Payments to suppliers
– Financial reports
– Customer credit data

Human Resources

• Functions of Human Resources

– Recruit, train, evaluate, compensate employees,
benefits, government compliance
• HR uses sales forecasts developed by the
individual departments to plan personnel
needs
• Systems integrated using ERP software
provide the data sharing necessary between
functional areas

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Human Resources

• HR needs information from the other departments

• Tasks related to employee hiring, benefits, training,
and government compliance are all responsibilities
of HR
• HR needs accurate forecasts of personnel needs
from all functional units
• HR needs to know what skills are needed to perform
a particular job and how much the company can
afford to pay employees
• Observing governmental regulations in recruiting,
training, compensating, promoting, and terminating
employees

Human Resources

The Human Resources functional area exchanges data with the Accounting
and Finance, Marketing and Sales, and Supply Chain Management functional
areas

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Human Resources

• Inputs for HR
– Personnel forecasts
– Skills data
• Outputs for HR
– Regulation compliance
– Employee training and certification
– Skills database
– Employee evaluation and compensation

Other ERP Modules

• Production
– Helps in the planning and optimizing of the manufacturing capacity,
parts, components, and material resources using historical
production data and sales forecasting.

• Purchasing
– Streamlines the procurement process of required raw materials and
other supplies.

• Inventory Management
– Facilitates the processes of maintaining the appropriate level of stock
in a warehouse.

• Miscellaneous Modules
– Nontraditional modules such as business intelligence, self-service,
project management, and e-commerce.

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Functional Area Information Systems

• Potential inputs and outputs for each functional area
described next
• Note the kinds of data needed by each area and how people
use the data
• Information systems maintain relationships between all
functional areas and processes
• Significant amount of data is maintained by and shared
among the functional areas
• Timeliness and accuracy of these data critical to each area’s
success and to company’s ability to make a profit and
generate future growth
• ERP software allows all functional areas to share a common
database
– Allows accurate, real-time information to be available

Components of the Enterprise Systems

Architecture
• Functional
– Defines the ERP modules that support the various business
functions of the organization. Examples include:
• Accounting
• Human Resources
• Procurement
• Fulfillment
• Etc.

• System
– Defines the ERP architecture through the physical components of
hardware, software, and networking angle.

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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
requirements for system infrastructure, training,
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
– Scalability - Easier to add, change, and remove applications.
– Reliability - Implementing multiple levels of redundancy.
– Flexibility - Flexibility in partitioning is very simple.
– Maintainability - Support and maintenance costs are less on one
server.
– Reusability - Easier to implement reusable components.
– Security - IT staff has more control system to provide higher security.
• Limitations
– Can be very expensive and complex.

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Tiers
• The Web Tier
– Web-based portal allows users the ability to access and analyze
information through their Web browser.

• The Application Tier

– Consists of a Web browser and reporting tool where business
processes and end-users interact with the system.
– 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

– Focus is on structure of all organizational data and its relationships
with both internal and external systems.

A Three-Tier ERP Architecture

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Example of Architecture of ERP at Large

University

WebLine ERP Architecture

Source: http://www.weblineindia.com/erp_modules_solutions_tech_overview.htm

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WebLine ERP Architecture

Business Logic Layer: Layered architecture

Source: http://www.weblineindia.com/erp_modules_solutions_tech_overview.htm

SAP - Sales and Distribution

Above diagram shows sub-functionality for Sales and Distribution module.

Diagram shows individual business activities within each sub-functionality and
flow of those activities.
Source: http://wiki.sdn.sap.com/wiki/display/ERPLO/ERP+SD

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SAP – Order Management Process

Above diagram shows step-by-step activities for Order Management Business

process. Diagram also shows modules and sub-functionality support activities in
the business process.

Source: http://wiki.sdn.sap.com/wiki/display/ESpackages/ES+Wiki+Home

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