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Discuss in detail the four main reasons that shaped the evolution of ERP systems.

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C O N C E P T S I N E N T E R P R I S E
R E S O U R C E P L A N N I N G

Fourth Edition

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C O N C E P T S I N E N T E R P R I S E
R E S O U R C E P L A N N I N G

Fourth Edition

Ellen F. Monk
University of Delaware

Bret J. Wagner
Western Michigan University

Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States

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Concepts in Enterprise Resource Planning,
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BRIEF CONTENTS

Preface xv

Chapter 1

Business Functions and Business Processes 1

Chapter 2

The Development of Enterprise Resource Planning Systems 19

Chapter 3

Marketing Information Systems and the Sales Order Process 49

Chapter 4

Production and Supply Chain Management Information Systems 77

Chapter 5

Accounting in ERP Systems 117

Chapter 6

Human Resources Processes with ERP 159

Chapter 7

Process Modeling, Process Improvement, and ERP Implementation 183

Chapter 8

RFID, Business Intelligence (BI), Mobile Computing, and the Cloud 215

Glossary 243

Index 249

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TABLE OF CONTENTS

Preface xv

Chapter 1 Business Functions and Business Processes 1
Functional Areas and Business Processes 2

Functional Areas of Operation 2
Business Processes 3

Functional Areas and Business Processes of a Very Small Business 6
Marketing and Sales 6
Supply Chain Management 7
Accounting and Finance 7
Human Resources 8

Functional Area Information Systems 8
Marketing and Sales 9
Supply Chain Management 10
Accounting and Finance 12
Human Resources 13

Chapter Summary 16
Key Terms 16
Exercises 16
For Further Study and Research 17

Chapter 2 The Development of Enterprise Resource Planning Systems 19
The Evolution of Information Systems 20

Computer Hardware and Software Development 21
Early Attempts to Share Resources 22
The Manufacturing Roots of ERP 22
Management’s Impetus to Adopt ERP 23

ERP Software Emerges: SAP and R/3 25
SAP Begins Developing Software Modules 26
SAP R/3 26
New Directions in ERP 27

PeopleSoft 27
Oracle 28
SAP ERP 28

SAP ERP Software Implementation 31
Features of SAP ERP 33

ERP for Midsized and Smaller Companies 34
Responses of the Software to the Changing Market 34

Choosing Consultants and Vendors 35
The Significance and Benefits of ERP Software and Systems 36

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Questions About ERP 36
How Much Does an ERP System Cost? 36
Should Every Business Buy an ERP Package? 37
Is ERP Software Inflexible? 38
What Return Can a Company Expect from Its ERP Investment? 39
How Long Does It Take to See a Return on an ERP Investment? 39
Why Do Some Companies Have More Success with ERP Than Others? 40
The Continuing Evolution of ERP 41

Chapter Summary 44
Key Terms 44
Exercises 45
For Further Study and Research 45

Chapter 3 Marketing Information Systems and the Sales Order Process 49
Overview of Fitter Snacker 50
Problems with Fitter Snacker’s Sales Process 51

Sales Quotations and Orders 52
Order Filling 53
Accounting and Invoicing 55
Payment and Returns 55

Sales and Distribution in ERP 56
Presales Activities 56
Sales Order Processing 56
Inventory Sourcing 57
Delivery 57
Billing 57
Payment 57

A Standard Order in SAP ERP 58
Taking an Order in SAP ERP 58
Discount Pricing in SAP ERP 64
Integration of Sales and Accounting 65

Customer Relationship Management (CRM) 66
Core CRM Activities 67
SAP’s CRM Software 68
The Benefits of CRM 72

Chapter Summary 74
Key Terms 74
Exercises 75
For Further Study and Research 76

Chapter 4 Production and Supply Chain Management Information Systems 77
Production Overview 78

Fitter’s Manufacturing Process 79
Fitter’s Production Sequence 79

Fitter’s Production Problems 80
Communication Problems 80
Inventory Problems 80
Accounting and Purchasing Problems 81

Exercise 4.1 82

x Table of Contents

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The Production Planning Process 82
The SAP ERP Approach to Production Planning 83
Sales Forecasting 84
Exercise 4.2 85
Sales and Operations Planning 85
Sales and Operations Planning in SAP ERP 88

Disaggregating the Sales and Operations Plan in SAP ERP 93
Exercise 4.3 95
Demand Management 95
Exercise 4.4 97
Materials Requirements Planning (MRP) 97

Bill of Material 97
Lead Times and Lot Sizing 98

Exercise 4.5 101
Exercise 4.6 101
Materials Requirements Planning in SAP ERP 101
Detailed Scheduling 105
Providing Production Data to Accounting 107
Exercise 4.7 108

ERP and Suppliers 108
The Traditional Supply Chain 109

EDI and ERP 110
The Measures of Success 112
Exercise 4.8 112

Chapter Summary 114
Key Terms 114
Exercises 114
For Further Study and Research 115

Chapter 5 Accounting in ERP Systems 117
Accounting Activities 118

Using ERP for Accounting Information 121
Operational Decision-Making Problem: Credit Management 123

Industrial Credit Management 123
Fitter’s Credit Management Procedures 124
Credit Management in SAP ERP 124
Exercise 5.1 127

Product Profitability Analysis 127
Inconsistent Record Keeping 127
Inaccurate Inventory Costing Systems 128

Inventory Cost Accounting Background 128
ERP and Inventory Cost Accounting 129
Product Costing Example 130

Exercise 5.2 131
Product Cost Analysis in SAP ERP 131
Activity-Based Costing and ERP 132

Table of Contents xi

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Problems Consolidating Data from Subsidiaries 133
Currency Translation 134
Intercompany Transactions 135

Management Reporting with ERP Systems 136
Data Flows in ERP Systems 136
Document Flow for Customer Service 137
Built-In Management-Reporting and Analysis Tools 138

The Enron Collapse 139
Outcome of the Enron Scandal 140
Key Features of the Sarbanes-Oxley Act of 2002 141

Implications of the Sarbanes-Oxley Act for ERP Systems 142
Archiving 143
User Authorizations 145
Tolerance Groups 146
Financial Transparency 147
Exercise 5.3 150

Trends in Financial Reporting—XBRL 150
Chapter Summary 151
Key Terms 152
Exercises 152
For Further Study and Research 157

Chapter 6 Human Resources Processes with ERP 159
Problems with Fitter’s Human Resources Processes 160

Recruiting Process 161
The Interviewing and Hiring Process 162
Human Resources Duties After Hiring 164

Human Resources with ERP Software 167
Advanced SAP ERP Human Resources Features 172

Time Management 172
Payroll Processing 173
Travel Management 173
Training and Development Coordination 175

Additional Human Resources Features of SAP ERP 177
Mobile Time Management 177
Management of Family and Medical Leave 177
Management of Domestic Partner Benefits 177
Administration of Long-Term Incentives 177
Personnel Cost Planning 178
Management and Payroll for Global Employees 178
Management by Objectives 178

Chapter Summary 180
Key Terms 180
Exercises 180
For Further Study and Research 181

xii Table of Contents

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Chapter 7 Process Modeling, Process Improvement, and ERP Implementation 183
Process Modeling 184

Flowcharting Process Models 184
Fitter Expense-Reporting Process 185
Exercise 7.1 187
Extensions of Process Mapping 187
Event Process Chain (EPC) Diagrams 189
Exercise 7.2 196

Process Improvement 197
Evaluating Process Improvement Prior to Implementation 198

ERP Workflow Tools 200
Implementing ERP Systems 203

ERP System Costs and Benefits 205
Implementation and Change Management 206

Implementation Tools 206
System Landscape Concept 210

Chapter Summary 211
Key Terms 211
Exercises 211
For Further Study and Research 214

Chapter 8 RFID, Business Intelligence (BI), Mobile Computing, and the Cloud 215
Radio Frequency Identification (RFID) Technology 216
Business Intelligence/Business Analytics 219
In-Memory Computing 220
Mobile Computing 224
From Internet-Enabled to Cloud Computing 226

SAP and the Internet 226
NetWeaver 226
NetWeaver Tools and Capabilities 227
NetWeaver at Work for Fitter 228
Exercise 8.1 228

SaaS: Software as a Service 229
SAP Business ByDesign 229
Advantages of Using SaaS 230
Disadvantages of Using SaaS 231

Exercise 8.2 233
Option 1: Buying Computers and Software Rights for an ERP System 234
Option 2: Using an SaaS Provider to Deliver ERP Software 235
Calculate the NPV and Make a Recommendation 235

Chapter Summary 238
Key Terms 238
Exercises 238
For Further Study and Research 239

Glossary 243
Index 249

Table of Contents xiii

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PREFACE

This is a book about Enterprise Resource Planning (ERP) systems; it is also about
how a business works and how information systems fit into business operations. More
specifically, it is about looking at the processes that make up a business enterprise
and seeing how ERP software can improve the performance of these business pro-
cesses. ERP software is complicated and expensive. Unless a company uses it to
become more efficient and effective in delivering goods and services to its customers,
an ERP system will only be a drain on company resources.

Our experience in teaching about ERP systems has revealed that undergraduate
business students do not always understand how businesses operate, and advanced
undergraduate students—and even many MBA students—do not truly grasp the pro-
blems inherent in unintegrated systems. These students also do not comprehend
business processes and how different functional areas must work together to achieve
company goals. As a result, many students do not understand how an information
system should help business managers make decisions.

Consequently, we set out to write a book that does the following:

• Describes basic business functional areas and explains how they are related
• Illustrates how unintegrated information systems fail to support business

functions and business processes that cut across functional area boundaries
• Demonstrates how integrated information systems can help a company pros-

per by improving business processes and by providing business managers
with accurate, consistent, and current data

We have found that our focus on business processes has been well received.

The Approach of This Book
A key feature of our book is the use of the fictitious Fitter Snacker Company, a man-
ufacturer of nutritious snack bars, as an illustrative example throughout the book. We
show how Fitter Snacker’s somewhat primitive and unintegrated information systems
cause operational problems. We intentionally made the systems’ problems easy to
understand, so the student could readily comprehend them. Potential solutions for
solving integration problems are illustrated using SAP’s ERP software.

The fourth edition of Concepts in Enterprise Resource Planning reflects the
current state of the ERP software market and other areas of the information technol-
ogy market that affect ERP systems, while adding updated examples of how compa-
nies are using integrated systems to solve business problems and achieve greater
success. The book has eight chapters:

• Chapter 1, “Business Functions and Business Processes,” explains the pur-
poses for, and information systems requirements of, main business functional
areas—Marketing and Sales, Supply Chain Management, Accounting and

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Finance, and Human Resources. This chapter also describes how a business
process cuts across the activities within business functional areas and why
managers need to think about making business processes work.

• Chapter 2, “The Development of Enterprise Resource Planning Systems,”
provides a short history of business computing and the developments that led
to today’s ERP systems. Chapter 2 concludes with an overview of ERP issues
and an introduction to the SAP ERP software.

• Chapter 3, “Marketing Information Systems and the Sales Order Process,”
describes the Marketing and Sales functional area, and it highlights the pro-
blems that arise with unintegrated information systems. To make concepts easy
to understand, the Fitter Snacker running example is introduced. After
explaining Fitter Snacker’s problems with its unintegrated systems, we show
how an ERP system can help a company avoid these problems. Sample SAP ERP
screens are used to illustrate the concepts. Because using ERP can naturally
lead a company into ever-broadening systems’ integration, a discussion of
customer-relationship management (CRM) software concludes the chapter.

• Chapter 4, “Production and Supply Chain Management Information Systems,”
describes how ERP systems support Supply Chain Management—the coordi-
nated activities of all the organizations involved in converting raw materials
into consumer products on the retail shelf. As in Chapter 3, the problems
caused by Fitter Snacker’s unintegrated information system are explored,
followed by a discussion of how ERP software could help solve these problems.

• Chapter 5, “Accounting in ERP Systems,” describes accounting processes and
how ERP systems support those processes. This chapter clearly distinguishes
between financial accounting (FI) and managerial accounting (CO) issues.
Included is an overview of the Enron collapse and the resulting Sarbanes-
Oxley Act along with the act’s impact on information systems, specifically
management controls and audit capabilities. XBRL—and its relationship to
ERP systems and financial reporting—is explored, along with the transition to
the IFRS accounting standards.

• Chapter 6, “Human Resources Processes with ERP,” covers human resource
management. While the Human Resource software module is the least
integrated component of all ERP systems, it includes numerous processes
that are critical to a company’s success, including strategic issues like
succession planning.

• Chapter 7, “Process Modeling, Process Improvement, and ERP Implementation,”
first presents flowcharting basics, followed by the highly structured EPC process
model. Implementation issues conclude the chapter. We believe that process
improvement, not large-scale implementation, should be the focus in an intro-
ductory ERP course.

• Chapter 8, “RFID, Business Intelligence (BI), Mobile Computing, and the
Cloud,” covers current technologies that are impacting ERP systems. In this
edition, the text covers radio frequency identification (RFID), business intel-
ligence (BI) and in-memory computing, mobile computing, and the cloud.
Because technology changes rapidly, this chapter provides an introduction to
these current topics, rather than an exhaustive treatment of the subjects, and
the instructor will likely want to provide current supplements.

xvi Preface

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How Can You Use This Book?
This fourth edition continues our goal of keeping the text at an introductory level.
The book can be used in a number of ways:

• The book, or selected chapters, could be used for a three-week ERP treat-
ment in undergraduate Management Information Systems, Accounting
Information Systems, or Operations Management courses.

• Similarly, the book or selected chapters could be used in MBA courses, such
as foundation Information Systems or Operations Management courses.
Although the concepts presented here are basic, the astute instructor can
build on them with more sophisticated material to challenge the advanced
MBA student. Many of the exercises in the book require research for their
solution, and the MBA student could do these in some depth.

• The book could serve as an introductory text in a course devoted wholly to ERP.
It would provide the student with a basis in how ERP systems help companies to
integrate different business functions. The instructor might use Chapter 8 as
the starting point for teaching the higher-level strategic implications of ERP and
related topics. The instructor can pursue these and related topics using his or
her own resources, such as case studies and current articles.

• Because of the focus on fundamental business issues and business processes,
the book can also be used in a sophomore-level Introduction to Business course.

Except for a computer literacy course, we assume no particular educational or
business background. Chapters 1 and 2 lay out most of the needed business and
computing groundwork, and the rest of the chapters build on that base.

Features of This Text
To bring ERP concepts to life (and down to earth) this book uses sales, manufactur-
ing, purchasing, human resources, and accounting examples for the Fitter Snacker
company. Thus, the student can see problems, not just at an abstract level, but within
the context of a company’s operations. We believe this approach makes business pro-
blems and the role ERP can play in solving them easier to understand.

The book’s exercises have the student analyze aspects of Fitter Snacker’s infor-
mation systems in various ways. The exercises vary in their difficulty; some can be
solved in a straightforward way, and others require some research. Not all exercises
need to be assigned. This gives the instructor flexibility in choosing which concepts to
emphasize and how to assess students’ knowledge. Some exercises explore Fitter
Snacker’s problems, and some ask the student to go beyond what is taught in the
book and to research a subject. A solution might require the student to generate a
spreadsheet, perform calculations, document higher-level reasoning, present the
results of research in writing, or participate in a debate.

The book includes an additional element designed to bring ERP concepts to life:
Another Look features, which are short, …

Enterprise Systems Configuration
for Business

MIS 490

CHAPTER 2

The Development of Enterprise Resource Planning
(ERP) Systems

2

3

Objectives

After completing this chapter, you will be able to:

• Identify the factors that led to the development of Enterprise
Resource Planning (ERP) systems

• Describe the distinguishing modular characteristics of ERP software

• Discuss the pros and cons of implementing an ERP system

• Summarize ongoing developments in ERP

4

Introduction

• Efficient, integrated information systems are very important for
companies to be competitive

• An Enterprise Resource Planning (ERP) system can help integrate a
company’s operations
• Acts as a company-wide computing environment

• Includes a database that is shared by all functional areas

• Can deliver consistent data across all business functions in real time

The Evolution of Information Systems

• Silos
• Information systems configuration used until recently

• Companies had unintegrated information systems that
supported only the activities of individual business
functional areas

• Current ERP systems evolved as a result of:
• Advancement of hardware and software technology

• Development of a vision of integrated information
systems

• Reengineering of companies to shift from a functional
focus to a business process focus

5

Management’s Impetus to Adopt ERP

Figure 2-2 Information and material flows in a functional business model

6

ERP Software Emerges: SAP and R/3

• 1972: five former IBM systems analysts in Mannheim, Germany
formed Systemanalyse und Programmentwicklung (Systems Analysis
and Program Development, or SAP)

• SAP’s goals:
• Develop a standard software product that could be configured to meet the

needs of each company

• Data available in real time

• Users working on computer screens, rather than with voluminous printed
output

7

SAP R/3

• 1982: SAP released its R/2 mainframe ERP software package

• 1988: SAP began development of its R/3 system to take advantage of
client-server technology

• 1992: first version of SAP R/3 released

• SAP R/3 system was designed using an open architecture approach

• Open architecture: third-party software companies encouraged to
develop add-on software products that can be integrated with
existing software

8

Developments in ERP

• Late 1990s: Year 2000 (or Y2K) problem motivated many companies
to move to ERP systems

• By 2000, SAP AG had 22,000 employees in 50 countries and 10 million
users at 30,000 installations around the world

• By 2000, SAP’s competition in the ERP market:
• Oracle

• PeopleSoft

• Late 2004: Oracle succeeded in its bid to take over PeopleSoft

9

New Directions in ERP (cont’d.)

• PeopleSoft
• Founded by David Duffield, a former IBM employee

• Today, PeopleSoft, under Oracle, is a popular software choice for managing
human resources and financial activities at universities

• Oracle
• SAP’s biggest competitor

• Began in 1977 as Software Development Laboratories (SDL)

• Founders: Larry Ellison, Bob Miner, and Ed Oates

10

New Directions in ERP (cont’d.)

Figure 2-5 Modules within the SAP ERP integrated information systems

environment (Courtesy of SAP AG)

11

SAP ERP Software Implementation (cont’d.)

• Tolerance groups
• Specific ranges that define transaction limits

• SAP has defined the tolerance group methodology as its method for placing
limits on an employee

• Configuration allows the company to further tailor tolerance group
methodology

12

SAP ERP Software Implementation (cont’d.)

• Features of SAP ERP
• First software that could deliver real-time ERP integration

• Usability by large companies

• High cost

• Automation of data updates

• Applicability of best practices
• Best practices: SAP’s software designers choose the best, most efficient ways in which

business processes should be handled

13

The Significance and Benefits of ERP Software
and Systems
• More efficient business processes that cost less than those in

unintegrated systems

• Easier global integration

• Integrates people and data while eliminating the need to update and
repair many separate computer systems

• Allows management to manage operations, not just monitor them

• Can dramatically reduce costs and improve operational efficiency

14

The Continuing Evolution of ERP

• Understanding the social and business implications of new
technologies is not easy

• ERP systems have been in common use only since the mid-1990s

• ERP vendors are working to solve adaptability problems that plague
customers

15

Questions About ERP

• How much does an ERP system cost?

• Should every business buy an ERP package?

• Is ERP software inflexible?

• What return can a company expect from its ERP investment?

• How long does it take to see a return on an ERP investment?

• Why do some companies have more success with ERP than others?

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Summary

• Speed and power of computing hardware increased exponentially,
while cost and size decreased

• Early client-server architecture provided the conceptual framework
for multiple users sharing common data

• Increasingly sophisticated software facilitated integration, especially
in two areas: A/F and manufacturing resource planning

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Summary (cont’d.)

• Growth of business size, complexity, and competition made business
managers demand more efficient and competitive information
systems

• SAP AG produced a complex, modular ERP program called R/3
• Could integrate a company’s entire business by using a common database

that linked all operations

• SAP R/3, now called SAP ERP, is modular software offering modules
for Sales and Distribution, Materials Management, Production
Planning, Quality Management, and other areas

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Summary (cont’d.)

• ERP software is expensive to purchase and time-consuming to
implement, and it requires significant employee training—but the
payoffs can be spectacular
• For some companies, ROI may not be immediate or even calculable

• Experts anticipate that ERP’s future focus will be on managing
customer relationships, improving planning and decision making, and
linking operations to the Internet and other applications through
service-oriented architecture

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Enterprise Systems Configuration
for Business

MIS 490

CHAPTER 1

Business Functions and Business Processes

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Objectives

After completing this chapter, you will be able to:

• Name the main functional areas of operation used in business

• Differentiate between a business process and a business function

• Identify the kinds of data each main functional area produces

• Identify the kinds of data each main functional area needs

• Define integrated information systems, and explain why they are essential in
today’s globally competitive business environment

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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 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

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Functional Areas of Operation

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Business Processes

• Collection of activities that takes one or more kinds of input and
creates an output that is of value to customer
• Customer can be traditional external customer or internal customer

• Thinking in terms of business processes helps managers to look at
their organization from the customer’s perspective

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Business Processes (cont’d.)

Figure 1-2 Sample business processes related to the sale of a

personal smartphone

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Business Processes (cont’d.)

• Information system (IS): Computers, people, procedures, and
software that store, organize, and deliver information
• Standalone Systems

• Sharing data effectively and efficiently between and within functional
areas leads to more efficient business processes

• Integrated information systems: Systems in which functional areas
share data
• ERP

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Business Processes (cont’d.)

Figure 1-3 A process view of business

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Business Processes (cont’d.)

• Businesses take inputs (resources) and transform these inputs into
goods and services for customers
• Inputs: Material, people, equipment

• Managing inputs and business processes effectively requires accurate
and up-to-date information

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Marketing and Sales

• Functions of Marketing and Sales
• Developing products

• Determining pricing

• Promoting products to customers

• Taking customers’ orders

• Helping create a sales forecast

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Marketing and Sales (cont’d.)

Figure 1-4 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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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

• With accurate data about required production levels:
• Raw material and packaging can be ordered as needed

• Inventory levels can be kept low, saving money

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Functional Areas of Operation

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Supply Chain Management (cont’d.)

Figure 1-5 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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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

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Functional Areas of Operation

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Accounting and Finance (cont’d.)

Figure 1-6 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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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

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Functional Areas of Operation

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Human Resources (cont’d.)

Figure 1-7 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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Role of ERP Systems

• 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

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Summary
• Basic functional areas: Marketing and Sales, Supply Chain

Management, Accounting and Finance, and Human
Resources

• 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,
orders raw materials from suppliers, receives raw material,
manufactures products, maintains facilities, and ships
products to customers

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Summary (cont’d.)

• Accounting and Finance: Financial accounting to provide summaries
of operational data in managerial reports, 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

• Information systems capture, process, and store data to provide
information needed for decision making

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Summary (cont’d.)

• Employees working in one functional area need data from employees
in other functional areas
• Functional area information systems should be integrated, so shared data are

accurate and timely

• Managers think in terms of business processes that integrate the
functional areas
• Need to share information between functions and functional areas

• ERP software provides this capability by means of a single common database

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