2.1 To 2.4 - Presentation For UPES

DSIT 7001-
IT Applications in Supply Chain Management
Module – 1
Organizations, Management, and the
Network
Presented By: Rohit Sindhwani
@ UPSC –MBA LSCM ,
Sem Jul-Dec-2020
Module – 1
Organizations, Management, and the Network
Contents :
2.1 Business Processes and Information Systems
2.2 Types of Information Systems
2.3 System that span the Enterprise(ERP)
2.4 Case Study

LEARNING OBJECTIVES
• Define and describe business processes and their relationship to
information systems.
• Describe the information systems supporting the major business
functions
• Evaluate the role played by systems serving the various levels of
management in a business and their relationship to each other.
• Explain how enterprise applications and intranets promote

business process integration and improve organizational
performance.
• Assess the role of the information systems function in a business.

Major Business Processes
• Order-to-cash process
• Customer Relationship
• Inventory Process Management
• Manufacturing Process
• Supplier Relationship
• Sales and Distribution Management (SRM)
• Finance and Controlling

• Human Resource (HR)
• Materials Management
Order-to-cash process
The Order Fulfillment Process
Fulfilling a customer order involves a complex set of steps that requires the
close coordination of the sales, accounting, and manufacturing functions.
Business Process Associated with SAP

Inventory Process
Overview of an Inventory Process
This system provides information about the number of items available in inventory to
support manufacturing and production activities.
Manufacturing Process
SAP Production Planning (PP) is
composed of the following
components
• DM (Data Management)
• LTP (Long tern planning)
• MRP(Material Requirement
Planning)
• MPS (Master Production
Schedule)
• SOP (Sales Operation Planning)
• Bills of Material (BOM)
• Shop Floor Control
• CRP (Capacity Requirement
Planning)
• Automatic material
requisitions on the basis of
MRP
• Capacity planning
• Routings
• Information systems and so
forth.
2.1 Manufacturing Process in SAP
Production Planning Module of SAP
Generally encompasses the integration and streamlining of the varied

needs of a manufacturing enterprise and takes care of the proper
planning of its allied processes.
Production planning functionalities generally include:

• Planning of schedules
• Dispatching inspection
• Co-ordination and control of raw materials, employees and tools for
achieving high quality products and meeting customer demands.
Finance Process
SAP FI (Financial Accounting) is accountable for tracking the

flow of financial data across the organization in a controlled
manner and integrating all the information for effective strategic
decision-making
FI − Finance
CO − Controlling
IM − Investment Management
TR − Treasury
EC − Enterprise Controlling
Controlling Process
•Cost Element Accounting (Overview of costs and revenues that occur in an organization)
•Cost Center Accounting
•Activity-Based-Accounting (Analyzes cross-departmental business processes)
•Internal Orders
•Product Cost Controlling (costs that occur during the manufacture of a product /service)
•Profitability Analysis (Analyzes the profit or loss of individual market segments)
•Profit Center Accounting
Materials Management Process
Material Management deals with movement of materials via other modules like
logistics, supply chain management, sales and delivery, warehouse management,
production and planning.
Supplier Relationship Management (SRM)
The effective and efficient transition of products and services between an organization and its suppliers. The main
process covered in this section is procurement of products like direct materials, indirect materials, and services. This
can effectively integrate with planning, accounting, and inventory system.
Customer Relationship Management (CRM)

CRM deals with end-to-end customer
related processes. CRM is designed to
centralize the data related to all the
customers associated with an
organization. It helps an organization to −
• Maintain its sales, services, and

build marketing strategies
according the market demand
and customer data analysis.
• Remain focused on its customers
and via information analysis, help
the business to know more about
its customers.
• Improve sales and services and
building better relationships with
customers.
Human Resource (HR)

APO Process in SAP
Sub Modules of APO

APO-DP Process in SAP

APO-SNP Process in SAP

SNP Process Flow Chart

Sales and Distribution Process

Sales and Distribution Process

SALES AND DISTRIBUTION TERMS USED IN PROCESSING
Bill-to Party : Person or company that receives the invoice for a delivery or service. The
bill-to party is not necessarily the payer who settles the bill.
Condition: Data element used to define prices, taxes and output according to the criteria
selected by the user.
Condition Record: Data record that stores a condition, possibly with condition

supplements. Conditions that can be entered in a condition record include: Prices,
Discounts/surcharges & Taxes
Consignment Order: Material sent to a customer for evaluation or beta reasons is

transacted on a consignment sales order.
Contact Person: Person at the customer location who deals with the sales or marketing
department at the vendor location.

Creating with Reference: When a document or data is copied to provide the basis for another
document or data. In simple terms, it is a copy.
Delivery Due List: SAP presents sales orders, consignment orders, spares orders and internal
orders to manufacturing through the delivery due list.
Delivery Note: The document that accompanies a shipment to the customer. It prints

automatically on Goods Issue.
Delivery Scheduling: Determination, based on the goods issue date, of all dates relevant for
shipping. The system determines when the company must start the picking and packing
activities to ensure that the requested loading date is met.
Distribution Channel: A distribution channel specifies how a company drums up business and
which organizations are involved in distribution activities.
Division: Organizational unit set up to supervise the distribution and monitor the profitability
of a particular sales material. Customer-specific arrangements, such as partial deliveries,
prices or terms of payment, can be defined for each division.

Document Date: The issue date of the original document.
Document Flow: Representation in the system of all the documents for one particular
business transaction. A document flow could, for example, consist of a quotation, a sales
order, a delivery, and an invoice. This provides a complete view of flow in the sales and
distribution chain.
Goods Issue: When goods issue is posted on a shipment, inventory is removed from stock
and dollars are transferred to cost of goods sold.
Higher-level Dependency: Highest level “parent” item in bill of material structures. When

assigning a higher-level item to a lower-level item, you are indicating the number of the
higher-level item to which that lower-level item belongs in a hierarchy.
Lower-level Dependency: Lower level “child” item in bill of material structures. Each lower-
level item is dependent on a higher-level item, to which it is assigned in a hierarchy.
Non-stock Item: A non-stock item is a material that never holds in stock. This type of item is
usually procured for a customer based on a sales order. This should not be confused with low
priced free stock items, which SAP refers to as consumables or expense items.
Order Type: Document types allow the system to process different kinds of business
transactions, such as standard orders and credit memo requests, in different ways. (see Sales
and Distribution Document Type)
Payer: Person or company that settles the bill for a delivery of goods or for services
rendered. The payer is not necessarily the bill-to party.
Pricing Procedure: Defines the conditions permitted for a particular document and the
sequence in which the system takes these conditions into account during pricing. A standard
pricing procedure is defined in the standard version of the SAP system. It contains the
conditions most commonly used. These include material prices as well as various discounts
and surcharges (freight, tax).
Production Order: A production order is the vehicle to convert lower-level parts on a

BOM into a stocked upper-level part. A production order is built using routing and work
center configuration.
Reserved Stock: When a production order is released, lower-level stock is soft allocated to

reserved stock. Reversed quantity will increase, but unrestricted will not decrease.
Material issued to the production order from a reservation decreases reserved stock and
unrestricted together.
Revenue Account Determination: Establishes the revenue accounts to which prices,

discounts and surcharges are to be posted. The system uses conditions to determine the
appropriate accounts.
Route: Shipping priority, for sales order; e.g., same day, overnight, two-day, three-day,
four-day, or five-day delivery service.
Sales and Distribution Document: SAP document that represents a business transaction.

The following documents exist for sales and distribution: sales documents, shipping
documents & billing documents. A sales and distribution document consists of a header
and any number of items: The header contains data that applies to the whole document
(terms of payment, shipping address, texts, etc.). The items contain information
concerning the goods or services the customer wants to purchase.
Sales Area: The sales area is determined by the sales organization, distribution channel,
and division.
Sales and Distribution Document Types: SAP document that represents a business

transaction in the sales department. The following sales document types exist:
quotation, sales order, complaints (returns, credit memo request) and debit memo
request. Further processing in sales and distribution, such as creating shipping and billing
documents, is carried out on the basis of the sales documents. A sales document
consists of header data that is valid for the whole document and of any number of items
that contain information about the goods or services the customer wants to purchase.
Sales Office: The sales office represents the region within sales organizational structure;
e.g., East, West, Central, Canada, and Government.
Sales Organization: The sales organization represents the sales hierarchy within sales
organizational structure; e.g., North America/Canada and APLA.
Ship-to Party: Person or company that receives the goods. The ship-to party is not
necessarily the sold-to party, the bill-to party or the payer.
Shipping Conditions: General strategy for shipping goods to a customer. For example, if

the shipping conditions state that the goods must arrive at the customer location as soon
as possible, the system automatically suggests the shipping point and route that can
deliver the goods the fastest.
Shipping Point: Area of manufacturing from which orders are delivered.
Sold-to Party: Person or company that places an order for goods or services. The sold-to
party can also perform the functions of the payer, bill-to party or ship-to party.
Text Type: Classification for the various texts the user can define in master records or
documents. Text types include: sales texts, shipping texts and internal notes.
Unrestricted Stock: Stock that may be used to satisfy sales orders or production
requirements.
2.2
Types of Information
Systems
Contents
• Categorization of Information Systems
• Levels of Information Systems
• Inter-relationship of Information Systems

Categorization of Information Systems
• Systems from a functional perspective(Covered in last unit)

Sales and marketing systems
Manufacturing and production systems
Finance and accounting systems
Human resources systems
• Systems from a constituency perspective
Transaction processing systems
Management information systems
Decision-support systems
Executive support systems
Kind of Information Systems

Types of systems at the 4 levels
Level 1 -Transaction Processing Systems (TPS)
Level 2 -Management Information Systems (MIS) Level 3
-Decision Support Systems (DSS)
Level 4 -Executive Information Systems (EIS)

Level 1- Operational
Transaction Processing Systems (TPS):
Inputs: Transactions or events
Processing: Sorting; listing; merging, updating
Outputs: Detailed reports; lists; summaries
Users: Operational personnel; supervisors

2. Transaction Processing Systems

Transaction Processing Systems

• A transaction processing system provides a way to collect,
process, store, display modify or cancel transactions.
• Most of these systems allow multiple transactions to take

place simultaneously.
• The data that this system collects is usually stored in databases

which can be used to produce reports such as billing, wages, inventory
summaries, manufacturing schedules, or check registers.
•Produces routine answers

STAGES OF TRANSACTION PROCESSING
 Five Stages Of Transaction Processing

 Data Entry
 Processing
 Database Maintenance
 Document And Report Generation
 Inquiry Processing
Level 2- MIS
Management Information System (MIS):
 Inputs: Summary transaction data
 Processing: Simple models; low level analysis
 Outputs: Summary reports
 Users: Middle managers
Example: Weekly, monthly, and annual resource allocation. Not five year plans
and not daily details, but something in between.
 Some characteristics of MIS that make them differ from
DSS (on next slide)
 Structured and semi-structured decisions
 Output is often the kind that you need routinely each term (quarter,
month, year) to evaluate how to proceed next.
Management Information System (MIS)
 Provides information for managing an

organization
 Extract and summarize data from TPSs
 Allow managers to monitor & direct the organization
 Provide accurate feedback
 Provide pre-specified reports on a scheduled basis
 Top managers make strategic decisions
 Middle managers make tactical decisions
 Line managers make operations decisions
 Knowledge workers create and integrate knowledge
 Clerical workers use and manipulate information
Decision Support System(DSS)

An interactive information system that provides information, models, and
data manipulation tools to help make decisions in semi-structured and
unstructured situations
 Support analytical work
 Simulation and Optimization
 Simulation model – calculates the simulated outcome of tentative decisions

and assumptions
 Optimization model – determine optimal decisions based on criteria supplied
by the user, mathematical search techniques, and constraints
A decision support system helps make decisions by working and
analyzing data that can generate statistical projections and data
models.
This system gives support rather than replacing a managers judgement
while improving the quality of a managers decision. A DSS helps solve
problems while using external data.
Decision Support System(DSS)

 Online analytical processing (OLAP) : the use of data analysis
tools to explore large databases of transaction data
 Data mining : the use of analysis tools to find patterns in large
transaction databases
 Executive information system (EIS)
 A highly interactive system that provides a flexible access
to information for monitoring results and general business
conditions
 Use both internal and competitive information
 User-friendly interface
Level 2- (Management Level)
Decision Support System (DSS):

• Inputs: Databases optimized for statistical analysis
• Processing: Interactive. Simulations and statistical analysis
• Outputs: Responses to queries; statistical test results.
• Users: Professionals, staff
 Support monitoring, controlling, decision-making, and administration by

middle management.
 Example: Could answer the following query: “We need to trim 5% of our
menu offerings to limit complexity in operations.
 Which items are the worst performing; are most likely to lead to sales of
other products left on the menu, and have the most ingredients unique to
their recipes?”
Top level (Strategic Level)-
Executive Support System (ESS):
 Inputs: Aggregate data. Internal and external

 Processing: Interactive and graphical simulations
 Outputs: Projections
 Users: Senior managers
Example: 5-year operating plan. Answer question like “what are long-
term industry cost trends and how are we doing relative to them?”
 Gets data from all internal IS plus external industry data bases
 Information Systems that Support Long- Range Planning of Senior
Management.
Summary- 4 Levels of Information Systems

Types of systems (INTERRELATIONSHIPS )

• Transaction Processing Systems (TPS)
– Automate handling of data about business
activities (transactions)
• Management Information Systems (MIS)

– Converts raw data from transaction
processing system into meaningful form
• Decision Support Systems (DSS)

– Designed to help decision makers
– Provides interactive environment for TPS generally feed all other systems
- MIS generally indicate when a DSS is
decision making
needed and provide input for them
- ESS take all internal data but usually
only
• Expert Systems (ES) summary data from MIS and DSS level
– Replicates decision making process - Output data from one is input data for others
to
Interrelationships Among Systems
The various types of systems in the organization have interdependencies. TPS are major
producers of information that is required by many other systems in the firm, which, in turn,
produce information for other systems. These different types of systems are loosely coupled
in most business firms, but increasingly firms are using new technologies to integrate
information that resides in many different systems.
Systems Development for Different IS Types

Exercise. Match the type of information system with the organizational
level where they are most commonly used:
 Transaction Processing Systems (TPS)

 Management Information Systems (MIS)
 Decision Support Systems (DSS)
 Expert Systems (ES)
Top
Managers
Middle
Managers
First-Line
Managers
Operatives
Other Information Systems
•Expert Systems
•Office Automation Systems (OAS)
•Communication Systems
•Other Systems
Expert Systems
 Support professionals faced with complex

situations requiring expert knowledge in a well-
defined area
 They represent human expertise also called
knowledge-based systems
 Typically use if-then rules
 Used as interactive advisors or as automated
tools
Office Automation Systems (OAS)
 Help people perform personal record

keeping, writing, and calculations efficiently
 Main types of tools include:

 Spreadsheet programs
 Text & image processing systems
 Personal database systems and note-
Taking systems
Communication Systems
 Sharing information in many different forms
 Teleconferencing
 The use of electronic transmission to permit same-time different-
place meetings
 Audio conferencing
 a single telephone call involving 3 or more people
 Audio-graphic conferencing
 an extension of audio conferencing, permitting the
participants to see graphical material
 Videoconferencing
 interactive meeting involving groups of people that can see each
other using display screens

 E-mail, Voice Mail, and Fax
 Instant Messaging and Chat
Communication Systems
 Groupware
 Software and related procedures that help teams work together
by sharing information and by controlling internal workflows. e.g.
Lotus Notes
 Intranets and Extranets
 INTRANETS: Private networks, Use the same interface as
the Web, Accessible only to company employees
 Examples of applications: Corporate news, Employee manuals,
Corporate policies, Telephone directories, etc.
 EXTRANETS: Similar to intranets, but geared
towards customers
 Examples of applications:Detailed product descriptions, FAQs,
Maintenance information, etc.
Other Systems
• Enterprise applications
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems
• Intranets and extranets

• E-business, e-commerce, and e-government
2.3 Systems That Span the Enterprise
The Information Systems Function in Business
Contents-
• The Enterprise System
• Organizing the information systems function

Enterprise systems
Enterprise systems, or enterprise resource planning (ERP) systems, model and

automate many business processes, such as filling an order or scheduling a
shipment, with the goal of integrating information across the entire company and
eliminating complex, expensive links between computer systems in different areas
of the business. Information that was previously fragmented in different systems
can seamlessly flow throughout the organization so that it can be shared by
business processes in manufacturing, accounting, human resources, and other areas
of the firm. Discrete business processes from sales, production, finance, and
logistics can be integrated into company-wide business processes that flow across
organizational levels and functions.
The enterprise system collects data from various key business processes and stores
the data in a single comprehensive data repository where they can be used by other
parts of the business. Managers emerge with more precise and timely information
for coordinating the daily operations of the business and a firm-wide view of
business processes and information flows.
Enterprise Systems
• Also called “enterprise resource planning (ERP) systems”
• Suite of integrated software modules and a common central

database
• Collects data from many divisions of firm for use in nearly all
of firm’s internal business activities
• Information entered in one process is immediately available
for other processes
Enterprise Systems
• Enterprise Software
• Built around thousands of predefined business processes that
reflect best practices
• Finance/accounting: general ledger, accounts payable, and so on
• Human resources: personnel administration, payroll, and so on
• Manufacturing/production: purchasing, shipping, and so on
• Sales/marketing: order processing, billing, sales planning, and so on
• To implement, firms:
• Select functions of system they wish to use.
• Map business processes to software processes.
• Use software’s configuration tables for customizing.
Enterprise systems
Enterprise Systems
How Enterprise
Systems Work
Enterprise systems
feature a set of
integrated software
modules and a
central database that
enables data to be
shared by many
different business
processes and
functional areas
throughout the
enterprise
Enterprise Systems
Business value of enterprise systems

• Increase operational efficiency.
• Provide firm wide information to support decision making.
• Enable rapid responses to customer requests for information
or products.
• Include analytical tools to evaluate overall organizational
performance.
Enterprise Application Architecture
Enterprise applications automate processes that span multiple business functions and organizational
levels and may extend outside the organization.
Enterprise Application Architecture

Example of Supply Chain Management System
Customer orders, shipping notifications, optimized shipping plans, and other supply chain
information flow among Warehouse Management System (WMS), Transportation
Management System (TMS), and its back-end corporate systems.
APO Process in SAP

APO-DP Process in SAP

APO-SNP Process in SAP

SNP Process Flow Chart

The information systems department

Q&A
• What are the major steps in Order-to-Cash business Process ?
• Draw a comprehensive manufacturing process with major process components .
•Draw Supplier Relationship Management (SRM) schematic diagram with
processes controlled and major functions covered by it.
•Enlist and define various sub-modules of APO of SAP .
• What are features and key benefits of SNP ?
•Define and describe types of information system used at various levels of
organization .
•What are inputs, processing , output and users of DSS?
• Explain how enterprise applications and intranets promote business process
integration
and improve organizational performance.

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DSIT 7001-

IT Applications in Supply Chain Management

2.1 Business Processes and Information Systems

2.2 Types of Information Systems

2.3 System that span the Enterprise(ERP)

2.4 Case Study

• Explain how enterprise applications and intranets promote

• Assess the role of the information systems function in a business.

Major Business Processes

• Finance and Controlling

The Order Fulfillment Process

Business Process Associated with SAP

Overview of an Inventory Process

Production Planning Module of SAP

Generally encompasses the integration and streamlining of the varied

Production planning functionalities generally include:

SAP FI (Financial Accounting) is accountable for tracking the

Materials Management Process

Supplier Relationship Management (SRM)

Customer Relationship Management (CRM)

• Maintain its sales, services, and

Human Resource (HR)

APO Process in SAP

Sub Modules of APO

APO-DP Process in SAP

APO-SNP Process in SAP

SNP Process Flow Chart

Sales and Distribution Process

Sales and Distribution Process

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Condition Record: Data record that stores a condition, possibly with condition

Consignment Order: Material sent to a customer for evaluation or beta reasons is

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Delivery Note: The document that accompanies a shipment to the customer. It prints

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Higher-level Dependency: Highest level “parent” item in bill of material structures. When

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Production Order: A production order is the vehicle to convert lower-level parts on a

Reserved Stock: When a production order is released, lower-level stock is soft allocated to

Revenue Account Determination: Establishes the revenue accounts to which prices,

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Sales and Distribution Document: SAP document that represents a business transaction.

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Sales and Distribution Document Types: SAP document that represents a business

SALES AND DISTRIBUTION TERMS USED IN PROCESSING

Shipping Conditions: General strategy for shipping goods to a customer. For example, if

Shipping Point: Area of manufacturing from which orders are delivered.

• Categorization of Information Systems

• Levels of Information Systems

• Inter-relationship of Information Systems

Categorization of Information Systems

• Systems from a functional perspective(Covered in last unit)

Kind of Information Systems

Types of systems at the 4 levels

Level 1 -Transaction Processing Systems (TPS)

Level 2 -Management Information Systems (MIS) Level 3

-Decision Support Systems (DSS)

Level 4 -Executive Information Systems (EIS)

Transaction Processing Systems (TPS):

Inputs: Transactions or events

Processing: Sorting; listing; merging, updating

Outputs: Detailed reports; lists; summaries