Enterprise Systems

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Enterprise Systems
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Learning Objectives

• Describe enterprise systems
• Describe enterprise resources planning (ERP)
  systems
• Explain the organization value chain
• Describe relationship of organization value chain
  and an enterprise system
• Illustrate value of systems integration
• Show how an enterprises system provides support
  for an organizations processes
• Summarize the major modules contained in an ERP
  system
• Describe how and enterprise system supports major
  business event processes
• Enumerate the pros and cons of implementing
  enterprise systems

Enterprise Systems
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Enterprise Systems on the AIS Wheel

• The enterprise system cuts across all accounting
  application and affects control considerations

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Enterprise System

• Integrates business processes and information
  from entire enterprise
• Helps coordinate the operation of business
  functions
• ERP systems are software packages that can be
  used for the core systems necessary to support
  enterprise systems

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ERP Systems Vendors
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SAP Modules
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Third-Party Modules

• Customer Relationship Management (CRM)builds and
  maintains customer related data
• Customer Self-Service (CSS)allows customers to
  complete tasks without assistance
• Sales Force Automation (SFA)automates sales
  tasks such as order processing and tracking

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Third-Party Modules, Contd.

• Supply Chain Management (SCM)plans and executes
  demand planning, inventory acquisition,
  manufacturing, distributing and selling
• Product Lifecycle Management (PLM)manages
  product data from design through disposal of
  product

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Enterprise Systems Value Chain

• Enterprise systems facilitate value chain
  management
• The value chain is the system of activities that
  transform inputs into outputs valued by the
  customer
• The goal of an organization is to add the
  greatest value with the lowest costs thereby
  increasing competitive advantage

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Value Chain and System
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The Value of Systems Integration

• One of the values provided by an enterprise
  system is the coordination of value activities in
  the value chain.
• The system performs this coordination by sharing
  data across business processes.
• In the following slides we describe what life
  would be like without integrated systems and then
  how enterprise systems solve some of those
  problems.

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Inefficient Customer Service
1. Check if the customer exists in the system
and has good credit.
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Inefficient Customer Service
2. Find out if good can be promised from
warehouse stock or if it has to be scheduled for
manufacturing. Tell the customer when they would
receive the item. The date is known as available
to promise or ATP.
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Inefficient Customer Service
3. If item is not on the shelf, when will it be
released from manufacturing? Sally could review
production schedules and add the time required to
pick, pack, and ship the item. This would not,
however, tell her if the item had already been
allocated to another customer.
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Inefficient Customer Service
4. In the event that the item must be
manufactured, when could it be scheduled, and how
long will the manufacturing process take?
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Inefficient Customer Service
5. How long will it take vendors to supply raw
materials so that manufacturing can take place?
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Inefficient Customer Service
6. What price will be charged to this customer
for this order? The price to charge must be
obtained from marketing.
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Inefficient Customer Service
7. Needs to check AR balance to determine if
customer has sufficient credit. Without direct
access to the open AR data, Sally will have to
call accounting to approve this order.
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Inefficient Customer Service
8. If credit is insufficient, must check with
credit department for change in credit line.
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Inefficient Customer Service

• Do you think that Sally wants to keep the
  customer on the phone throughout this process?
• Would you consider this to be good customer
  service?

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Solution to Inefficient Customer Service

• Enterprise system establishes available to
  promise (ATP) by checking warehouses and
  scheduled manufacturing
• Price and creditworthiness automatically
  determined from database

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Enterprise Systems Store Data in Tables
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Processing Orders Requires Multiple Tables
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Stored Data Used for Decisions
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Major ERP Modules

• Sales and Distribution
• Records customer orders
• Shipping
• Billing
• Connections to
• Materials management module
• Financial accounting module
• Controlling module
• Based on SAP (best selling ERP)

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Major ERP Modules, Contd.

• Materials Management
• Acquisition and management of goods from vendors
• Purchase order preparation
• Receiving
• Recording invoice
• Interacts with
• Sales and distribution module
• Financial accounting module
• Controlling module

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Major ERP Modules, Contd.

• Financial Accounting
• Plays a central role in an ERP system and
  incorporates data from other modules into general
  ledger accounts and financial statements
• Business events from other modules, such as SD
  and MM, are incorporated by the FI module into
  the general ledger accounts and included in the
  external account statements, the balance sheet,
  profit and loss statement, and statement of cash
  flows.
• The FI module also includes accounts receivable
  and accounts payable functions to record and
  manage that data directly and to complete events
  begun in the SD and MM modules.

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Major ERP Modules, Contd.

• Controlling and Profitability Analysis
• Handles internal accounting including
• Cost center accounting
• Profitability analysis for sales
• Activity-based accounting
• Budgeting

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Major ERP Modules, Contd.

• Human Resources
• Recruiting, management and administration of
  personnel
• Payroll processing
• Training and travel
• Benefits
• Reports

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Order-to-Cash
1. Respond to customer inquiries and requests for
quotes (RFQs). Some companies add on separate CRM
modules
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Order-to-Cash
2. Record customer order including check
customer credit check inventory pricing and
check where and when inventory will be available
to send to the customer. Triggers picking of
goods or purchase of goods from another vendor.
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Order-to-Cash
3. Pick goods from warehouse and pack for
shipment.
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Order-to-Cash
4. Ship goods to the customer. ERP system would
choose the appropriate routing and carrier,
record the cost of goods sold and inventory
reduction in the general ledger. Some ERP systems
trigger the billing process when a shipment takes
place.
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Order-to-Cash
5. Billing the customer and recording the sale in
AR. ERP system ensures correct quantities,
prices, terms, addresses, etc. ERP system can be
used to analyze sales profitability by comparing
product costs to selling price.
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Order-to-Cash
6. Receive and record payment. Includes
recording cash receipts and updating cash and
accounts receivable. ERP data can then be used
to manage customer credit and invest available
cash.
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Purchase-to-Pay
1. Determine requirements, complete purchase
requisition. ERP system may automatically generate
the purchase requisition based on quantity
on- hand, quantity-on-order, and expected demand.
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Purchase-to-Pay
2. Prepare and record purchase order. An ERP
system assists the buyer in identifying sources
of supply for the requested item, preparing RFQs
to vendors, analyzing vendor quotes, comparing
vendor prices, terms, and past performance
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Purchase-to-Pay
3. Receive and record goods. Compare quantity
ordered to quantity received. The ERP routes
goods to the function that requested them or
directs them the warehouse for immediate sale.
It also records vendor performance data.
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Purchase-to-Pay
4. Receive vendor invoice, match with PO and
receiving report record payable. If the
three-way match fails, the enterprise system
notifies the proper personnel to ensure timely
reconciliation of differences.
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Purchase-to-Pay
5. Prepare and record cash disbursement and
update accounts. An ERP system uses vendor and AP
data to schedule payments in accordance with
vendor terms and to receive discounts.