Business Processes

Workflow.
Procurement, Fulfilment, Production and
Integrated Process
 Concept of flows
• A process flows through the different functional departments in
the organization as various steps needed to complete the
business process is executed
• 4 types i.e physical, data ,document and information flows
• Physical
• The flow showing the physical activities associated with the
process to produce an output.
 Data Flow

• Data Flow
• At each step of the process there is data
generated eg. Customer order no, address,
qty, due date etc.
• This data flow through the physical steps in
the process and along the way it is modified
or added.
 Document Flow

•Document flow
• These data are found in documents eg PR,
PO that are created at different steps of the
process. These documents can either be
physical or electronic.
• These documents flow with the process.
 Information Flow
• Information flow
• Processes are executed many times eg a company
will process many customer orders per day.
• Each customer order executed is an instance or
occurrence of the process. At each instance of the
process, physical, data and document flows occur.
• Information flow is associated with each instance of
the process and at aggregate level over a period of
time.
• Data generated at each step and over the entire
process are accumulated and then can be presented
as information in the form of a report eg sales
report.
 The Procurement Process

• A series of steps that a company takes to acquire

materials either for manufacturing or reselling.
• Materials
• For manufacturing companies it is raw
materials
• For resellers it is finished goods for trading
 Risk in B2B
• In B2B, there are many risks because the purchase quantity
and the payment sums are large.
• Some of the risks involved are :
• Non payment
• Wrong quantity
• Wrong items
• Non shipment etc.
• Important that detailed and standardized processes are put in
place to minimize risks and do not damage the business
relationship.
Basic Manual Procurement Process
 Physical flow of Procurement Process

• Create requisition
• When stocks fall below a certain quantity , a purchase requisition is
raised.
• Create and send purchase order (PO)
• Purchasing will consolidate multiple requests , select a vendor and
raise a PO. Copy of PO sent to stores.
• Receive shipment
• The vendor will send the shipment which will be received by stores.
• Stores confirm DO or Packing List matches with PO. Stores raises
Goods Received Note and send to Purchasing.
• This step involves verifying contents of shipment, QC and storage at
designated places in the store.
 Physical flow of Procurement
Process
• Receive invoice
• Vendor sends invoice to accounting
• Send payment
• Accounting verifies accuracy of invoice and send
payment.
• How does the different departments communicate
with each other and ensure the accuracy of the
information in a manual system.
• There are a variety of documents at each stage of the
process.
 Document and Data Flow in
Procurement Process
• The following documents are used in a manual
process:
• Purchase requisition
• PO
• Packing list or DO
• Goods receipt document and Goods return
document
• Vendor Invoice
• Vendor Payment
Purchase Requisition
 PR Form

• PR states the item needed, qty required and date

when needed.
• It contains a unique preprinted PR number for tracking.
• 1. To be filled up by the requestor.
• 2. Product spec and qty required to be filled by
requestor.
• 4. Must be signed and approved.
• PR sent to purchasing dept and copy kept in file.
Purchase Order
 Purchase Order
• Purchasing dept upon receipt of the PR will select a vendor and raise
a PO.
• A PO is a legal document and only raised by purchasing dept to
ensure it complies with company policy and other legal requirements.
• Contains :
• 1. Ship to location
• 2. Unique PO number, PO and delivery date, shipping incoterms and
payment terms ( Nett nn OR X% mm/Nett nn).
• 3. Items, unit of measure, qty and pricing
• 4. Approval signature.
• Purchasing send PO to :
• Original to Vendor
• Copy file in purchasing
• Copy to stores to file together with PR
• Copy to Accounts dept
Packing List
 Packing List
• When the vendor send a shipment, a packing list ( aka
DO ) will follow the shipment.
• The stores upon receipt of the goods will have to sign
the packing list and return one copy to the vendor as
proof of receipt.
• Contains :
• 1. Vendor address
• 2. Shipment details, PO No, packed by etc and unique sales
order number from vendor to track the order status in
vendor’s organization. Unique customer number assigned to
each customer by the vendor.
• 4. Details of items.
Goods Receipt Note
 Goods Receipt Note

• GRN verifies that specified goods have been

received prepared and signed by the person
receiving it (4).
• It contains a unique identification number (1)
• The vendor number is a unique number to identify
the vendor in the company.
Invoice
 Invoice

• Once vendor has received the signed DO, he will send an

invoice to the company’s accounting dept requesting payment.
• Accounting will do a 3 way match i.e comparing PO, GRN and
invoice to ensure all information matches eg PO number, items
description, qty, prices etc.
• When 3 way match is ok, payment done either using check or
electronic transfer.
• Upon completion of payment, the order is closed and the
following are filed together : PO, GRN, invoice and payment
documents.
 Information Flows

• Instance Level Information

• This information is related to the status of one specific step in the
process eg. A specific PR.
• Status information is concerned about the state of the order as the
process is being executed. Eg: Has the PO been raised ? Or Has the
goods been received ?
• In a manual procurement process, this information is contained and
conveyed by the various documents discussed. Companies get this
information by retrieving and inspecting the various documents
which takes time.
 Information flows

• Process level information

• Concern with how well the overall purchasing process is
operating over a period of time.
• Data generated in the process must be compiled over a
period of time ( monthly or yearly) and converted into
useful information in the form of reports eg which
suppliers are on time, problems with quality etc.
• In a manual process, this is a very difficult task , time
consuming and prone to errors because data must be
obtained from many documents.
Procurement process using ERP

• ERP can support the procurement process as follows :

• All documents can be easily created and stored in a central
database.
• Documents can be automatically filled with repetitious
information eg address, unique numbers, item names from
drop down menu, shipping terms, pricing etc.
• Communication between and among people in the
company can be automated to reduce time eg when a PR is
made, a notification is automatically send to purchasing
dept to raise a PO.
ERP in Procurement