Term Paper
MIS 320 – Digital Enterprise Management
Section:1
Fall 2020
Submitted on:
14th, January, 2021
Submitted to:
Kabid Md Surid (KMS2)
Team 3 : Deviants
Fayaz Bin Amin
1731887030
Md. Mohsin Islam Sajol
1812835030
Md. Toabur Rahman
1811887030
Sajjad-Al-Nahiyan
1812113030
What are the functional departments in the headquarter? Describe functions of each
department.
Functional areas are sections of a business that perform a certain category of tasks, the areas have
constant communication with each other as most of their tasks are inter-related. These areas help
each other to complete the company’s tasks and ultimately help the company to achieve their goal
(Florida tech online, n.d.).
For the headquarters, each functional area will have a department and even though all the functions
will not be conducted there. There will still be top officials, who will oversee the whole process
and receive data from places like production, warehouse and so on.
So, for XYZ Phones there are five apparent departments, namely production department,
warehouse department, procurement department, sales department, and accounting department.
Production Department:
The activity of the production department in the headquarter is to oversee the production process,
try to design production process of new products if it is needed or modify processes by which the
company saves money, oversee and generate reports on aspects like the efficiency of production
process and if quality of products that are produced are up to the mark. Employees from this
department might conduct factory visits or get digitized reports on a regular basis from the
production plants.
The production department’s core function is to carry out the production process activities, this
might include producing products, requesting for raw materials, quality and cost control,
production planning and so on. In the above-mentioned case, “XYZ Phones” have their production
factories at Tejgaon Industrial Zone, Bangladesh and Hyderabad IT Park, India. For Bangladesh,
they produce three smartphones branded as “Optimus Basic”, “Optimus Basic+” and “Optimus
Prime” in their production plant located in Bangladesh, and they produce smartphones called
“Bumblebee” and Optimus Pro” for India in their production plant located at Hyderabad IT Park,
India.
Warehouse Department:
The activity of the warehouse department in headquarters is to oversee the overall condition of the
warehouse, to generate reports on the condition of the warehouse and figure out new ways to
increase efficiency, and reduce storage costs of the warehouse. They also try to find out if there is
need for expansion and provide guidance to employees in warehouses to conduct any changes if
required.
The core function of the warehouse department is to store and transfer the products. These tasks
may include requesting for new stock and raw materials; receiving raw materials and new stock;
pick, pack and ship orders; inventory management; recording inventory and raw material level and
so on (Vinculum, 2020). “XYZ Phones” have 6 warehouses of which 2 are in India where one is
for raw materials and the other is for finished goods. The other four warehouses are located in
Bangladesh where 2 warehouses are used to store raw materials and the other two is used to store
finished goods.
Procurement Department:
The activities of the procurement department in the headquarters is to try and find new suppliers
who produce better raw materials, negotiate with existing suppliers to get better rates on products
and help the other departments of the company in obtaining what they need.
Since the company is responsible for producing products and there is no indication of the company
producing its own raw materials, this means that the company has a procurement department which
is in charge of obtaining raw materials, and other assets needed for the function of a business,
sending sales order, ensuring right quantity and quality of obtained goods and so on.
Sales Department:
The sales department in the headquarters deal with the data from all the sale locations and services
centers. They generate reports on which products is doing well in which region and try to generate
strategies which will help them increase sales of products. They also try to identify needs of various
regions and convey the data to the other department which can be used to produce new products
or change existing products.
The core function of the sales department is to complete sales activities and promote the product
in market as well as provide after sales services. “XYZ Phones” have 5 sales centers in Bangladesh
which are in Gulshan-1, Kuril, Motijheel, Uttara of Dhaka and Lalkhan Bazar of Chittagong. There
are 6 sales centers in India which are located in Bandra of Bombay, New Market of Kolkata, Panaji
of Goa, Agra and Noida of Meerut and in New Delhi city. Besides that, there are also service
centers, of which 2 are located in Bangladesh and 3 are located in India.
Accounting Department:
The main task of the accounting department is to track and record every financial transaction of
the company. In doing so they can produce financial statements such as balance sheet, general
journal, producing invoice, billing and adjusting accounts and so on.
So, from the above discussion we can realize the functional departments of XYZ Phones
headquarters and the functions of each department.
Come up with a figure on the ERP org structure and describe each level.
ERP or Enterprise Resource Planning is the software that ensures integrated business process. By
integrated business processes we mean the ability of various functional departments of a company
to work together and communicate with each other through the ERP software in order to complete
a task.
Now the organizational structure hierarchy of the firm is broken down into three levels. Which are
described below:
Client:
Client represents the company; it has a server which hold all the data from the company codes and
plants. The client will have a single financial statement which will be the combination of the
company codes’ financial records. The data will be in the local currency of the company HQ or
any other universally recognized currency.
Company Code:
Company Code is the division of business processes based on factors such as location or
subsidiaries etc. It is a self-contained system consisting of its own financial records and own server
for storing data. The currency values will be in the currency of where the company code is located
in. For “XYZ Phones”, there are two company codes, one is in Bangladesh and the other is in
India.
Plant:
Plants are the basic organizational processes or units of any firm. Each company code will have
several plants and the plants within each company code will work together to complete various
tasks. “XYZ Phones” have 12 plants each in Bangladesh and Indian consisting of various
warehouse, assembling plants, sales and after sales service centers and so on.
Figure 1: ERP Diagram of Organizational Structure of XYZ Phones
How an ERP can help integrate the functions? Why do you need these integrations?
ERP or Enterprise Resource Planning helps the company to run efficiently through automation and
helps stop the phenomenon of silo effect. Silo effect occurs when any functional area of a company
does not communicate with other functional departments and does any activity on its own. The
system will ensure business activities by automating the information sharing system among the
related department without any information gap or missing information. The ERP system also as
mentioned above ensures integrated business process.
Now to better describe how ERP can help integrate the functions we can look at the procurement
process of XYZ Phones.
The advantages and need for ERP and integration is mentioned below:
•
If integration is established with the help of ERP, the employees of different departments
can access the data of their own and other departments easily and efficiently. This will help
the company in generating better decisions, making decisions faster which will help the
business to grow faster.
•
Integration will facilitate better communication and as a result people from different
departments will be able to communicate instantaneously. This will save the company from
failing to complete time sensitive deals and share information in a more cost-effective way
which will save the company money and help it to grow even further.
•
Integration ensured by ERP will abolish the need for keeping copies of same data in
different departments and the extra time required for sending and receiving data. As these
will be instantaneous, time will be saved and efficiency will be increased greatly.
•
Since every department will be integrated one can access various types of information
about the company from a single point and can get the most updated information at their
fingertips. This sort of access makes things easier to manage. This aspect also allows the
company to coordinate its efforts simultaneously to ensure each strategy generates profits
to its fullest.
•
If any problem arises, the identification of such is faster than any traditional system. This
also means that the managers and maintenance personnel can tackle such unfortunate
events with ease and keep the company running as smoothly as possible
So, from the above discussion we can understand how the ERP helps to integrate every functional
department of the company and how much such integration is important.
Discuss service-oriented architecture (SOA) for the whole organization. Consider all parts
of the org.
By Service Oriented Architecture or SOA, we mean any type of technology that allows
communication between multiple 3 tier client server systems, be it within the company or outside
it using internet protocol. This helps with integration, efficiency and adds value to the services are
provided by the company.
The most essential aspect of Service Oriented Architecture is Client Server Systems. Client Server
Systems are built upon Client Server Architecture which consists of define set of rules which helps
the system to store, organize and share data to and from its clients (Technopedia, 2020). Now for
most organizations, 3-tier client server systems are used that follows the 3-tier client server
architecture.
Server
(India)
Figure 2: 3-Tier Client Server Architecture.
Data Layer
Database Server: It is the combination of multiple computers and also can be referred to as the
master computer. Here for our diagram, this is the database of the India company code of the “XYZ
Phones” company. Its main task is to store the data of operations from India region. It hosts the
database, and has multiple software installed in order to help with communication and also hosts
India’s regional website for clients.
Application Layer
Application Servers: Its purpose is to serve each plant with ERP components. Every data of each
plant is served through or goes through each application server of its respective plant. Here the
company executives of India region can access data from warehouses or service centers from the
database server, but this information would be stored to that database server with the help of
application servers. Inversely, various plants can communicate and obtain data from the database
server, which would be served through the application servers as well.
Presentation Layer
Client Pc’s: Client Pcs’ are those which are used by employees to access information or by
customers to access the website and make orders and perform various other tasks. These clients
can make queries of various information and are provided with the requested data.
Now, this is only an example of one Company Code of the system, realistically, each plant,
company code, and even the client will have its own 3-tier client server systems. Integration is
only possible when these systems communicate with each other through Intra company
connection.
True and absolute integration is established when company’s ERP systems can communicate with
other outside ERP systems with the help of internet protocol and thus establish Inter Company
Connections.
Figure 3: Integration using SOA
The SOA of XYZ Phones:
XYZ Phones will have a central server for their Head Quarter, this will contain the financial as
well as other information of the company as a whole and contain info like various strategies and
plans regarding to how to move the company forward, they will also have their own client server
system. This main server will be able to access the two Company Codes’ Servers. Each company
code will have separate financial information as well as other information such as, records of orders
and level of inventory for each country which are specific to their own region. These Company
Code servers will be able to access each plant’s servers which will have information relative to each plant’s activities such as the
warehouse plant’s servers will have information of the raw materials or finished goods, suppliers and customer contacts and so on. Here,
the company codes and the plants themselves will also have their own client server systems.
Client
Company Code
Company Code
Plants
Plants
Figure 4: SOA of XYZ Phone Company
What are the types of raw materials for each product? You need to mention raw materials
for each product separately.
Answer:
XYZ Phones produces 5 types of product under 2 company code. The list of raw materials for each
product are given in the followings,
Optimus Basic Smart Phone
Figure: List of Raw Materials for Optimus Basic Smart Phone
Optimus Basic+ Smart Phone
Figure: List of Raw Materials for Optimus Basic + Smart Phone
Optimus Prime Smart Phone
Figure: List of Raw Materials for Optimus Prime Smart Phone
Bumblebee Smart Phone
Figure: List of Raw Materials for Bumblebee Smart Phone
Optimus Pro Smart Phone
Figure: List of Raw Materials for Optimus Pro Smart Phone
Make a chart of account (COA). Inclusion of general ledgers (GL) is upon you. Please do it
carefully. Also describe purpose of a GL account that is not self-descriptive. Also show
some sample transactions.
Chart of Accounts
Profit and Loss Accounts
Account
Number
6100000
6200000
6300000
6400000
6500000
6600000
6700000
6800000
7100000
7100000
7200010
7200020
7200030
7300000
7400000
7510000
7520000
7530000
7540000
7550000
7560000
7571000
7572000
7580000
7590000
7600000
7610000
Short Text
Long Text
Sales Revenue
Sales Revenue
Sales Revenue
Sales Revenue
Sales Revenue
Sales Discount
Revenue Deduction
Customer Service Revenue
COGS
Labor
Depreciation Expense
Depreciation Expense
Depreciation Expense
Salaries Expense
Discount Lost
Interest Expense
Rent Expense
Repair Expense
Sales Expense
Telephone Expense
Utilities Expense
Tax Expense
Tax Expense
Payroll
IT Expense
R&D Expense
Misc Expense
Sales Revenue (Optimus Basic Smartphone)
Sales Revenue (Optimus Basic+ Smartphone)
Sales Revenue (Optimus Prime Smartphone)
Sales Revenue (Bumblebee Smartphone)
Sales Revenue (Optimus Pro Smartphone)
Sales Discount
Revenue Deduction
Customer Service Revenue
Cost of Goods Sold
Labor Expenses
Depreciation Expense-Building
Depreciation Expense- Machinery
Depreciation Expense- Office Equipment
Salaries Expense
Discount Lost
Interest Expense
Rent Expense
Repair Expense
Sales Expense
Telephone Expense
Utilities Expense
Income Tax Expense
Property Tax Expense
Wage Expense
Information Technology Expense
Research and Development Expenses
Miscellaneous Expense
Balance Sheet
Account
Number
1100000
1110000
1120000
1400000
1500000
1600000
1700000
1800000
2100000
3100000
3200010
3200020
3200030
3300000
3400000
3400000
3510000
3520000
3530000
3540000
3550000
3560000
3571000
3572000
3580000
3590000
3610000
3620000
3630000
3640000
3650000
Short Text
Long Text
Bank
Cash
Cash Equivalent
Accounts Receivable
Int. Receivable
Inv-RM
Inv-WIP
Inv-FG
Inv-TG
Inv-OP
Prepaid Insurance
Prepaid Rent
Factory Land and Building
Factory Land and Building
Accumulated Depreciation
Warehouse
Warehouse
Machineries
Office Equipment
Furniture
Accounts payable
Insurance payable
Interest payable
Legal fees payable
Office salaries payable
Salaries payable
Accrued payroll payable
Capital
Withdrawal
Retained Earnings
GR/IR
Bank
Cash
Cash Paid
Accounts Receivable
Interest Receivable
Inventory of Raw Materials
Inventory of Work in Progress
Inventory of Finished Goods
Inventory of Trading Goods
Inventory of Operation Supplies
Insurance paid in advance
Rent paid in advance
Factory Land and Building - Tejgaon
Factory Land and Building - Hyderabad
Accumulated Depreciation
Warehouse - Bangladesh
Warehouse - India
Machines
Office Equipment
Furniture
Accounts payable
Insurance payable
Interest payable
Legal fees payable
Office salaries payable
Salaries payable
Accrued payroll payable
Owner’s Capital
Owner’s Withdrawal
Retained Earnings
Goods Receipt or Invoice Receipt Account
Transactions
Dec 1- Purchased camera lenses from Canon on credit for 100,000 BDT for Bangladesh.
XYZ Phones need to create subledgers and accounts payable accounts as they procured on credit
which means there is future transactions involved. The vendor sub ledger account is created when
the vendor master record is created to track money owed to vendor. Necessary general ledgers,
subledgers and possible financial impacts are stated below:
Accounts Payable
Reconciliation
3550000
Debit
Credit
-
100,000
General Ledger Accounts
Raw Materials (Camera
Lenses)
1600000
Debit
Credit
100,000
-
Bank
1100000
Debit
Credit
-
-
Accounts Payable Subledgers Accounts
Canon
8550000
Debit
Credit
-
100,000
Dec 2- Transaction cleared that happened on Dec 1
General Ledger Accounts
Accounts Payable Reconciliation
Bank
3550000
1100000
Debit
Credit
Debit
Credit
100,000
100,000
-
100,000
Accounts Payable Subledgers Accounts
Canon
8550000
Debit
Credit
100,000
100,000
Dec 3- Uttara sales center performed sales worth of 70,000 BDT. All on cash
XYZ Phones don't need to create subledgers and accounts receivable accounts as the sale is
performed on cash.
General Ledger Accounts
Cash
1110000
Sales Revenue
6100000
Debit
Credit
Debit
Credit
70,000
-
-
70,000
Dec 5- Gulshan sales center delivered 200,000 BDT equivalent products to Smart
technologies. It was done on credit.
XYZ Phones need to create subledgers and accounts receivable accounts as they sold on credit
which means there is future transactions involved. The customer sub ledger account is created
when the customer master record is created to track money owed by customer. Necessary general
ledgers, subledgers and possible financial impacts are stated below:
General Ledger Accounts
Accounts Receivable
Reconciliation
1400000
Debit
Credit
200,000
Sales Revenue
Bank
6100000
1100000
Debit
Credit
Debit
Credit
-
200,000
-
-
-
Accounts Receivable Subledgers Accounts
Smart Technologies
9100000
Debit
Credit
200,000
-
Dec 7- Transactions cleared that happened on Dec 5
General Ledger Accounts
Accounts Receivable Reconciliation
Bank
1400000
1100000
Debit
Credit
Debit
Credit
200,000
200,000
200,000
-
Accounts Receivable Subledgers Accounts
Smart Technologies
9100000
Debit
Credit
200,000
200,000
Prepare Vendor master data and Material master data for each of them. List of vendors is
upon you (do it for camera, rom, motherboard and display). (follow the chapter on
purchasing process).
Material Master data
Master data usually represents any type of entities that are related with a certain process. Material
master data is the most common and used form of master data, it has 3 views, namely financial
views, purchasing views, and storage views.
Financial views
Financial views of the material master data consist of three things. Initially it is the valuation
currency which denotes which currency the materials are priced in. In our case the vendors we are
dealing with wish to do transaction with U.S. Dollar (USD).
Secondly, there is the valuation class which denotes various general ledger accounts of the process
which is related to the materials involved in producing the products. A detailed list of valuation
class elements of XYZ phones are stated below.
Financial View
Account Number
8176001
8176002
8176003
8176004
8176005
8176006
8176007
Short Text
SUPEX
INRAW
INFIN
INTRD
INSMFC
INPRSUP
INOPSUP
Long Text
SUPPLIES EXPENSE
INVENTORY RAW MATERIAL
INVENTORY FINISHED GOOD
INVENTORY TRADING GOOD
INVENTORY SEMI FINISHED GOOD
INVENTORY PRODUCTION SUPPLIES
INVENTORY OPERATION SUPPLIES
Thirdly there is price control, it denotes the method that is used to value the materials. For XYZ
phones, we will use standard price, or fixed price method of price control. Components like
camera, rom, motherboard, and display there isn’t much factors which could cause its price to
fluctuate within a short amount of time, therefore XYZ phones will opt to choose this method.
Purchasing views
Purchasing view also contains various aspects which are explained below:
Purchasing groups:
As XYZ phones have production plants in two countries, they will have separate purchasing groups
which will try to identify vendors and help in procuring goods from such vendors at the best price
possible. Some data regarding to how many people are assigned and or employed in the purchasing
group and what is their office location may be included in the master data.
Goods receipt processing time:
It generally denotes how much time is required for the goods received to be processed into the
proper storage location after it is delivered. Time to get delivery from suppliers, Unboxing time,
Inspection time of products are used in master data. Now, these are very important as these can be
used to identify the next order purchase timings. Otherwise, production may stop as the products
are out of stop, again there may be delay in delivery of sales orders.
Delivery tolerance:
For XYZ phones we will tolerate ± 2% of over or under delivery.
Storage views
XYZ Phones deals with the storage of small sized electrical equipment and materials. As a result,
there are many aspects that need to be paid close attention to while they are stored. Such aspects
are detailed in the storage views of material master data. The details are mentioned below:
•
The humidity level should always be kept around 60%RH, as too low fosters static
discharge and too high is also not friendly for the shelf life of exposed electrical
components prone to corrosion.
•
The storage complex should be kept at 24 degrees Celsius constantly.
•
Components should be placed in special containers and bags which protect them from
ESD (Electro Static Discharge).
•
Shelf life of the components will be determined by the production run of each model of
cellphones.
•
Components, namely, Camera, ROM, Motherboard and Display are all classified as fragile
components which are susceptible to get damaged or become faulty if handled without
care.
Vendor Master data
Vendor master data is simply the data related to the businesses which are considered as a vendor
to the business. These data are kept to facilitate the execution of transaction and make the
purchasing process more efficient. The Vendor master data are grouped into 3 segments.
General Data:
General data in vendor master data contains identifying aspects of the company. XYZ phones are
not purchasing Camera, Motherboard, ROM, or Display from any local vendors. Hence as all these
raw materials are purchased from overseas, they will have the same vendors. Details such as Name,
Address, contact information such as email and phone numbers as well as code and rank of vendors
are mentioned in the general data.
Component
Vendor Rank
1
2
3
1
2
1
1
2
Camera
ROM
Motherboard
Display
Vendor Name
Sony
Sharp
Omnivision
Samsung
SK Hynix
samsung
Samsung
BOE
General Data
Address
Tokyo, Japan
Osaka, Japan
California, USA
Seol, South Korea
Icheon-si, South Korea
Seol, South Korea
Seol, South Korea
Beijing, China
Contact number
080-6478-7403
06-9639-5936
+1-213-6858503
+82-48-3947-3842
+82-73-8294-2234
+82-96-3754-9364
+82-74-3433-7399
+86 139 1099 8889
Email
sales@sonyimx.com
sales@sharpimg.com
sales@omnivision.com
sales@samram.com
sales@skhynix.com
sales@sammobo.com
sales@samdisp.com
sales@boedisp.com
vendor code
1298
1256
1238
1709
1787
1890
1434
1456
Accounting Data:
Transaction information as well as permanent data like subledger account, and accounts payable
reconciliation information is contained in the accounting data.
Vendor code
Subledger no.
1298
1256
1238
1709
1787
1890
1434
1456
7336635
7336637
7736632
5998478
5998454
8340657
9488939
9488970
Accounting Data
Accounts reconciliation no. Bank account no.
363443 293873038482028583
363457 293873456643598587
363476 293884982947583939
245498 201025377060734980
245472 201025377060734980
780095 344033459657930100
205584 252426989625477540
205576 252438576479234480
Payment term
30-day window
10-day window
30-day window
30-day window
15-day window
30-day window
On delivery
30-day window
Payment Method
Escrow
Escrow
Escrow
Escrow
Escrow
Escrow
Escrow
Wire-Transfer
Purchasing Data:
Purchasing data will include various information relating to searching and fixing vendors, contract
information and their terms and conditions of the XYZ Phones. Since there are two production
plants in India and Bangladesh, there will be two separate records for these plants.
Look at the purchasing processes below. You need to discuss each process. While discussing
each process, you can create 3 scenarios like creating multiple purchase requests on different
date, for year 2020 for Bangladesh and India. This section has to be much elaborate.
The above mention diagram depicts a detailed purchasing process. We will explain this process in
details by using various scenarios.
We will assume that central purchase organization handles the buying of assets.
Scenario 1:
XYZ Phones would like to make a new type of smartphone which will be produced in the
Bangladesh and India factories at equal quantities. For this reason, they would like to procure
50,000 batteries, rated at 5000 mAh, with unit price of $7 from a new supplier. Half of the amount
will be for Bangladesh production facility while the other half will be for India production facility.
The order will be placed on 13 April 2020, and will be required on 14 May 2020.
XYZ Phone’s ERP system will go through the processes according to the diagram to complete the
above-mentioned purchase.
Step 1: Requirement Determination
The requirements for any materials may arise from an automatic process or be generated by another
process or simply by manual entry.
Figure 1: Elements of the requirements determination step
Trigger
Trigger is any event that will initiate a process. According to our scenario, an increased need for
25,000 batteries in Indian production plant and 25,000 batteries in Bangladeshi production plant
is the trigger.
Data
For this process various types of data are required.
Organizational Data:
These types of data are prepared and stored in the company data base.
Client: XYZ phones
Company Code: India, Bangladesh
Receiving plant: Storage plant for raw materials in Bangladesh, Storage plant for raw materials in
India.
Material Master Data:
Material description: Batteries with 3000 mAh capacity.
Material group: Raw material
Unit of measure: Piece
Valuation price: $7 (standard price)
Vendor Master Data:
Vendor is not yet identified in this case, as a result this portion is left empty and would be filled
with data when vendor is identified.
Purchase Information Record:
Purchase information record consists of vendor master data and material master data elements, but
since our vendor is not selected yet, it cannot be formed.
User Input:
Users will input transaction data within the document manually. The person who is preparing
purchasing requisition document is going to input the data related to the required fields manually.
Material Number: BT10204
Required date: 14 May, 2020.
Quantity: 25,000 for storage plant for raw materials in Bangladesh, 25,000 for storage plant for
raw materials in India.
Receiving plant: Storage plant for raw materials in Bangladesh, Storage plant for raw materials in
India.
Task:
Only task in this process is to create the purchasing requisition using the above-mentioned data.
Outcome:
The final outcome of the requirement determination process is purchase requisition, which will
have a unique requisition number assigned by the system. This can be used so that concerned
parties can use this to track its progress through the various steps in the process.
This purchase requisition process will trigger the process of “the source of supply determination”.
Step 2: Source of Supply Determination
Since the vendor is not fixed for the new type of material, the purchasing organization will send a
request for quotation to possible vendors from the source list. Those vendors will send their offer
with price per unit for the material which is known as “quotation”. Using these quotations, the
purchasing organization of XYZ Phones is going to select the vendor who are going to provide the
batteries at the best possible price with best quality set as per the production department.
Suppose, XYZ Phone’s purchasing organization after considering various quotations will select
BYD for purchasing the required number of batteries, because they fulfill the pricing criteria of $7
per unit. In this way, source of supply determination will be completed by selecting a specific
vendor.
Step 3: Purchase Order Processing
Purchase order is a type of communication between vendor and receiver. This consists of
commitment of purchasing specific material under the stated terms.
Figure 2: Elements of the purchase order step
Trigger
The triggers will include the purchase requisition document created from requirement
determination process and the selected quotation from source of supply determination process.
Data
User Input/ Transaction Data:
In this case the person will verify the data related to quantity of material, which is in our case
50,000 batteries, and the data on receiving plant which are respectively storage plant for raw
materials in Bangladesh, and storage plant for raw materials in India.
Transaction Documents:
In this case the following documents will be required:
•
Purchase Requisition Document
•
Quotation
Master Data:
Material:
Description: Battery
Type: Lithium Ion
Capacity: 5000 mAh
Weight: 150 grams
Voltage: 3.8 volts
Vendor:
Communication method: Email
Contact person: Sales representative at BYD
Address: Shenzhen, Guangdong, China.
Conditions:
Price/ unit: $7
Discount: N.A.
Task
Creating and sending the purchase order to the vendor is the basic and mandatory task while
completing the process. Since our order involves a new product, we have to confirm delivery and
logistic details such a shipping method and other aspects.
Outcome
The document which is known as the purchase order will be the outcome of this process.
Additionally, “purchase order numbers” will be updated to the purchase requisition document. We
will verify whether the purchase requisition is associated with the specific purchase order number.
Step 4: Goods Receipt
The process starts when the materials are received at the plant. The user will have to complete
some tasks and insert some data in order to fulfill the goods receipt process and create the goods
receipt document.
Data
There will be 3 types of data:
•
Purchase order
This comes from the organization and includes data like, purchase order number, materials
ordered and the quantity of materials ordered.
•
Delivery document
This comes from the vendor and includes data like, purchase order number, materials
ordered and the quantity of materials ordered.
•
User input/ Transaction Data
User will crosscheck purchase order and delivery document and examine whether the
information is same or not. He will put purchase order location, meaning where the
materials will be stored in the good receipt document. He will also insert details about
movement type, which means what sort of transport will be used to unload the material to
warehouse.
Task
The main task in the goods receipt step is to verify and record the materials which are in the
shipment to the goods receipt document. The user will log in and create the goods receipt document
by providing purchase order number, this will add all the relevant data to the document. Then the
user will verify if these data are correct.
Outcome
Good receipt document is an outcome of this process. Additionally, it is the first step in the
procurement process that has an impact on financials specifically, on general ledger accounts.
Chart 1: Financial Impact of goods received
The goods inventory account is debited by the value of the goods received that is $350000. A
corresponding credit is posted to the goods receipt/invoice receipt (GR/IR) account.
Step 5: Invoice Verification
The vendor will send XYZ phones an invoice against that invoice there will be some accounting
impacts on the organization. We are assuming that we are purchasing the product on credit.
Chart 2: Financial Impact of Invoice verification
A debit of $350,000 is posted to the GR/IR account, and the vendor account is credited by the
same amount. Because the vendor account is a sub-ledger account, an automatic credit posting is
also made to the corresponding reconciliation account in the general ledger, the accounts payable
reconciliation account.
Step 6: Vendor Payment
Now XYZ company phones is ready to complete the payment to vendor. This will have the
following financial impact.
Chart 3 Financial Impact of vendor payment
Bank will credit $350,000 against the vendor as a result debit side of the vendor will increase by
$350,000. Subsequently Accounts Payable Reconciliation will be debited by $350,000.
So, the final outcome is the decrease of money from the bank. So, with the payment XYZ phones
are done with the procurement process from a vendor.
Scenario 2:
XYZ Phones would like to buy display from Sharp which is originated from Japan. For this reason,
they would like to procure 30,000 6-inch display, with 1080p resolution, with unit price of $10.
Half of the amount will be for Bangladesh production facility while the other half will be for India
production facility. The order will be placed on 6 March 2020, and will be required on 7 April
2020.
XYZ Phone’s ERP system will go through the processes according to the diagram to complete the
above-mentioned purchase.
Step 1: Requirement Determination
The requirements for any materials may arise from an automatic process or be generated by another
process or simply by manual entry.
Figure 3: Elements of the requirements determination step
Trigger
Trigger is any event that will initiate a process. According to our scenario, an increased need for
15,000 displays in Indian production plant and 15,000 displays in Bangladeshi production plant is
the trigger.
Data
For this process various types of data are required.
Organizational Data:
These types of data are prepared and stored in the company data base.
Client: XYZ phones
Company Code: India, Bangladesh
Receiving plant: Storage plant for raw materials in Bangladesh, Storage plant for raw materials in
India.
Material Master Data:
Material description: 6 inch display with 1080p resolution.
Material group: Raw material
Unit of measure: Piece
Valuation price: $10 (standard price)
Vendor Master Data:
Vendor name: Sharp
Vendor address: Sakai, Osaka, Japan.
Contact person: Sales representative at Sharp display technologies.
Purchase Information Record:
Purchase information record consists of vendor master data and material master data elements, in
this purchase information record will also include last purchase order information. Since we buy
displays from Sharp on a regular basis.
User Input:
Users will input transaction data within the document manually. The person who is preparing
purchasing requisition document is going to input the data related to the required fields manually.
Material Number: DC102044
Required date: 7 April, 2020.
Quantity: 15,000 for storage plant for raw materials in Bangladesh, 15,000 for storage plant for
raw materials in India.
Receiving plant: Storage plant for raw materials in Bangladesh, Storage plant for raw materials in
India.
Task:
Only task in this process is to create the purchasing requisition using the above-mentioned data.
Outcome:
The final outcome of the requirement determination process is purchase requisition, which will
have a unique requisition number assigned by the system. This can be used so that concerned
parties can use this to track its progress through the various steps in the process.
This purchase requisition process will trigger the process of vendor selection and evaluation.
Step 2: Vendor Selection and Evaluation
As XYZ Phones already know the vendor, they are going to include the name of the vendor just
by selecting the name of the vendor from their list and start the purchase ordering process.
Step 3: Purchase Order Processing
Purchase order is a type of communication between vendor and receiver. This consists of
commitment of purchasing specific material under the stated terms.
Figure 4: Elements of the purchase order step
Trigger
The triggers will include the purchase requisition document created from requirement
determination process and the selected quotation from vendor.
Data
User Input/ Transaction Data:
In this case the person will verify the data related to quantity of material, which is in our case
30,000 displays, and the data on receiving plant which are respectively storage plant for raw
materials in Bangladesh, and storage plant for raw materials in India.
Transaction Documents:
In this case the following documents will be required:
•
Purchase Requisition Document
•
Quotation
Master Data:
Material:
Description: Display
Type: LCD
Resolution: 1920 x 1080
Size: 6 inch
Vendor:
Vendor name: Sharp
Vendor address: Sakai, Osaka, Japan.
Contact person: Sales representative at Sharp display technologies.
Communication method: Email
Conditions:
Price/ unit: $10
Discount: N.A.
Task
Creating and sending the purchase order to the vendor is the basic and mandatory task while
completing the process. Since our order involves a new product, we have to confirm delivery and
logistic details such a shipping method and other aspects.
Outcome
The document which is known as the purchase order will be the outcome of this process.
Additionally, “purchase order numbers” will be updated to the purchase requisition document. We
will verify whether the purchase requisition is associated with the specific purchase order number.
Step 4: Goods Receipt
The process starts when the materials are received at the plant. The user will have to complete
some tasks and insert some data in order to fulfill the goods receipt process and create the goods
receipt document.
Data
There will be 3 types of data:
•
Purchase order
This comes from the organization and includes data like, purchase order number, materials
ordered and the quantity of materials ordered.
•
Delivery document
This comes from the vendor and includes data like, purchase order number, materials
ordered and the quantity of materials ordered.
•
User input/ Transaction Data
User will crosscheck purchase order and delivery document and examine whether the
information is same or not. He will put purchase order location, meaning where the
materials will be stored in the good receipt document. He will also insert details about
movement type, which means what sort of transport will be used to unload the material to
warehouse.
Task
The main task in the goods receipt step is to verify and record the materials which are in the
shipment to the goods receipt document. The user will log in and create the goods receipt document
by providing purchase order number, this will add all the relevant data to the document. Then the
user will verify if these data are correct.
Outcome
Good receipt document is an outcome of this process. Additionally, it is the first step in the
procurement process that has an impact on financials specifically, on general ledger accounts.
Chart 4: Financial Impact of goods received
The goods inventory account is debited by the value of the goods received that is $300,000. A
corresponding credit is posted to the goods receipt/invoice receipt (GR/IR) account.
Step 5: Invoice Verification
The vendor will send XYZ phones an invoice against that invoice there will be some accounting
impacts on the organization. We are assuming that we are purchasing the product on credit.
Chart 5: Financial Impact of Invoice verification
A debit of $300,000 is posted to the GR/IR account, and the vendor account is credited by the
same amount. Because the vendor account is a sub-ledger account, an automatic credit posting is
also made to the corresponding reconciliation account in the general ledger, the accounts payable
reconciliation account.
Step 6: Vendor Payment
Now XYZ company phones is ready to complete the payment to vendor. This will have the
following financial impact.
Chart 6: Financial Impact of vendor payment
Bank will credit $300,000 against the vendor as a result debit side of the vendor will increase by
$300,000. Subsequently Accounts Payable Reconciliation will be debited by $300,000.
So, the final outcome is the decrease of money from the bank. So, with the payment XYZ phones
are done with the procurement process from a vendor.
Scenario 3:
XYZ Phones would like to buy camera from Sony which is originated from Japan. For this reason,
they would like to procure 30,000 8 megapixels, with unit price of $10. Half of the amount will be
for Bangladesh production facility while the other half will be for India production facility. The
order will be placed on 20 March 2020, and will be required on 21 April 2020.
XYZ Phone’s ERP system will go through the processes according to the diagram to complete the
above-mentioned purchase.
Step 1: Requirement Determination
The requirements for any materials may arise from an automatic process or be generated by another
process or simply by manual entry.
Figure 5: Elements of the requirements determination step
Trigger
Trigger is any event that will initiate a process. According to our scenario, an increased need for
15,000 cameras in Indian production plant and 15,000 cameras in Bangladeshi production plant is
the trigger.
Data
For this process various types of data are required.
Organizational Data:
These types of data are prepared and stored in the company data base.
Client: XYZ phones
Company Code: India, Bangladesh
Receiving plant: Storage plant for raw materials in Bangladesh, Storage plant for raw materials in
India.
Material Master Data:
Material description: 8-megapixel camera.
Material group: Raw material
Unit of measure: Piece
Valuation price: $10 (standard price)
Vendor Master Data:
Vendor name: Sony
Vendor address: Minato city, Tokyo, Japan.
Contact person: Sales representative at Sony camera technologies.
Purchase Information Record:
Purchase information record consists of vendor master data and material master data elements, in
this purchase information record will also include last purchase order information. Since we buy
cameras from Sony on a regular basis.
User Input:
Users will input transaction data within the document manually. The person who is preparing
purchasing requisition document is going to input the data related to the required fields manually.
Material Number: SC15634
Required date: 21 April, 2020.
Quantity: 15,000 for storage plant for raw materials in Bangladesh, 15,000 for storage plant for
raw materials in India.
Receiving plant: Storage plant for raw materials in Bangladesh, Storage plant for raw materials in
India.
Task:
Only task in this process is to create the purchasing requisition using the above-mentioned data.
Outcome:
The final outcome of the requirement determination process is purchase requisition, which will
have a unique requisition number assigned by the system. This can be used so that concerned
parties can use this to track its progress through the various steps in the process.
This purchase requisition process will trigger the process of vendor selection and evaluation.
Step 2: Vendor Selection and Evaluation
As XYZ Phones already know the vendor, they are going to include the name of the vendor just
by selecting the name of the vendor from their list and start the purchase ordering process.
Step 3: Purchase Order Processing
Purchase order is a type of communication between vendor and receiver. This consists of
commitment of purchasing specific material under the stated terms.
Figure 6: Elements of the purchase order step
Trigger
The triggers will include the purchase requisition document created from requirement
determination process and the selected quotation from vendor.
Data
User Input/ Transaction Data:
In this case the person will verify the data related to quantity of material, which is in our case
30,000 cameras, and the data on receiving plant which are respectively storage plant for raw
materials in Bangladesh, and storage plant for raw materials in India.
Transaction Documents:
In this case the following documents will be required:
•
Purchase Requisition Document
•
Quotation
Master Data:
Material:
Description: Camera
Type: Standard
Resolution: 8 MP
Vendor:
Vendor name: Sony
Vendor address: Minato city, Tokyo, Japan.
Contact person: Sales representative at Sony camera technologies.
Communication method: Email
Conditions:
Price/ unit: $10
Discount: N.A.
Task
Creating and sending the purchase order to the vendor is the basic and mandatory task while
completing the process. Since our order involves a new product, we have to confirm delivery and
logistic details such a shipping method and other aspects.
Outcome
The document which is known as the purchase order will be the outcome of this process.
Additionally, “purchase order numbers” will be updated to the purchase requisition document. We
will verify whether the purchase requisition is associated with the specific purchase order number.
Step 4: Goods Receipt
The process starts when the materials are received at the plant. The user will have to complete
some tasks and insert some data in order to fulfill the goods receipt process and create the goods
receipt document.
Data
There will be 3 types of data:
•
Purchase order
This comes from the organization and includes data like, purchase order number, materials
ordered and the quantity of materials ordered.
•
Delivery document
This comes from the vendor and includes data like, purchase order number, materials
ordered and the quantity of materials ordered.
•
User input/ Transaction Data
User will crosscheck purchase order and delivery document and examine whether the
information is same or not. He will put purchase order location, meaning where the
materials will be stored in the good receipt document. He will also insert details about
movement type, which means what sort of transport will be used to unload the material to
warehouse.
Task
The main task in the goods receipt step is to verify and record the materials which are in the
shipment to the goods receipt document. The user will log in and create the goods receipt document
by providing purchase order number, this will add all the relevant data to the document. Then the
user will verify if these data are correct.
Outcome
Good receipt document is an outcome of this process. Additionally, it is the first step in the
procurement process that has an impact on financials specifically, on general ledger accounts.
Chart 7: Financial Impact of goods received
The goods inventory account is debited by the value of the goods received that is $300,000. A
corresponding credit is posted to the goods receipt/invoice receipt (GR/IR) account.
Step 5: Invoice Verification
The vendor will send XYZ phones an invoice against that invoice there will be some accounting
impacts on the organization. We are assuming that we are purchasing the product on credit.
Chart 8: Financial Impact of Invoice verification
A debit of $300,000 is posted to the GR/IR account, and the vendor account is credited by the
same amount. Because the vendor account is a sub-ledger account, an automatic credit posting is
also made to the corresponding reconciliation account in the general ledger, the accounts payable
reconciliation account.
Step 6: Vendor Payment
Now XYZ company phones is ready to complete the payment to vendor. This will have the
following financial impact.
Chart 9: Financial Impact of vendor payment
Bank will credit $300,000 against the vendor as a result debit side of the vendor will increase by
$300,000. Subsequently Accounts Payable Reconciliation will be debited by $300,000.
So, the final outcome is the decrease of money from the bank. So, with the payment XYZ phones
are done with the procurement process from a vendor.
References
Florida tech online. (n.d.). ERP Functional Areas . Retrieved from floridatechonline:
https://www.floridatechonline.com/blog/information-technology/erp-functionalareas/#:~:text=This%20may%20include%20departments%20such,lead%20prioritization%20and
%20customer%20retention.
Technopedia. (2020, August 25). What is Client/Server Architecture? - Definition from Techopedia.
Retrieved from Technopedia: https://www.techopedia.com/definition/438/clientserverarchitecture
Vinculum. (2020, February 14). Functions of a Warehouse Management System – All You Need to Know.
Retrieved from Vinculum Group: https://www.vinculumgroup.com/functions-of-warehousemanagement-system/