ERP and Business Processes ILLUSTRATED WITH MICROSOFT DYNAMICS NAV 2009 AUTHOR: HANS VAN DER HOEVEN MSC 1 ST E D I T I O N Chapter 1 2 GETTING TO KNOW BUSINESS FUNCTIONS, BUSINESS PROCESSES, ERP AND BUSINESS MANAGEMENT ERP and Business Processes Business Functions, Departments, Business Processes 3 Business Function: organizational unit Also known as “department” Hierarchical structure Line-staff organizational chart CEO Accounting and IT Sales Sales Reps ERP and Business Processes Back Office Office Manager Warehouse Front Office Purchasing U-turn to Business Processes 4 In the 1990’s Michael Porter’s Value Chain Business process is not a business function Trigger, ‘customer’ demand, inputs outputs ERP and Business Processes What is a Business Process? 5 A business process is a collection of coherent activities that starts with a trigger and ends with the delivery of one or several products. The products represent a value for the customer of these products. The customer could be an external customer, as well as an internal customer (a department). Services are also considered as products. ERP and Business Processes BPR 6 Business Process Redesign (Reengineering) Michael Hammer in the nineties of previous century Event driven Process Chains (EPC’s) Events drive logistic, finance, HR, etc. Processes consist of a collection of events which match with each other (activities). Cycle-approach O2C: Order to Cash P2P: Purchase to Pay H2R: Hire to Retire ERP and Business Processes Example of a Process Chart 7 ERP and Business Processes ERP and Business Management 8 ERP: Enterprise Resource Planning ERP-package Before island automation One integrated information system One central database Business Management (‘the management side of ERP’) Business Control ERP and Business Processes Chapter 2 9 FOCUS ON ERP ERP and Business Processes ERP in Historical Perspective 10 MRP MRP II ERP ERP II (or x-ERP) ERP and Business Processes MRP (I) 11 Materials Requirement Planning Deciding about material requirement for a production process Using a BOM and the quantity of neede finished products Material requirement leads to purchase proposals and eventually to purchase orders Bike example ERP and Business Processes MRP II 12 Manufacturing Resource Planning Not only raw materials Also resources like machines and people (capacities) Resources MRP II aims at manufacturing control ERP and Business Processes ERP 13 Enterprise Resource Planning Enterprise wide One integrated system instead of different seperated systems One central database A way of thinking about dealing with processes, so process orientation EPC’s: Event Driven Process Chains Chain of activities ERP and Business Processes ERP 14 ERP as a package standard software package with a very integrated functionality, which stretches out over all business processes in an organization. ERP as a phenomenon enterprise wide integrated planning and steering concept Organizational structure and management; Products, services and business processes; Information technology (computers, communication infrastructure, systems, internet, e-mail); People, competences and culture. ERP and Business Processes ERP II 15 Extended ERP (x-ERP) Collaboration between companies to reach a better position in the Supply Chain Intra-enterprise collaboration = ERP Inter-enterprise collaboration = ERP II Possibilities of Internet, EDI ERP and Business Processes CRM 16 Customer Relationship Management “Know your customer” Registering customer data, purchase behavior, data from external sources Analyzing and combining data See chapter 4 ERP and Business Processes SCM 17 Supply Chain Management Chain of companies that form a chain from natural resources to a product that is sold to a final consumer Copmpanies want to defend or extend their position in the Supply Chain Supply Chain Management See chapters 5 and6 ERP and Business Processes Best-of-Breed and ERP 18 Best-of-Breed (BOB) No integrated approach Functional approach Interfaces and middleware Specific needs, very different from ERP ERP and Business Processes Pros and Cons of ERP 19 pros cons Integration Long implementation Process orientation periods Complexity No made to measure solution Simple user interface Openness One vendor State-of-the-art International aspects ERP and Business Processes The vendors of ERP systems 20 SAP SAP Business Suite, All-in-One, Business One Oracle Oracle Financials, Peoplesoft, JD Edwards, Fusion Infor Mapics, Baan, SSA Global Microsoft Dynamics Dynamics NAV, Dynamics AX, Dynamics CRM Industry Solutions ERP and Business Processes Chapter 3 21 MICROSOFT DYNAMICS NAV 2009 ERP and Business Processes Microsoft Dynamics 22 Dynamics NAV Dynamics AX Dynamics GP Dynamics CRM ERP and Business Processes Dynamics NAV 2009 23 ERP and Business Processes Role Tailored Client (RTC) 24 Personas Role centers, list places, departments page ERP and Business Processes Modules / Departments 25 Financial Management Sales & Marketing Purchase Warehouse Manufacturing Jobs Resource Planning Service Human Resources Administration ERP and Business Processes Departments in the RTC 26 ERP and Business Processes Classic Client (CC) 27 ERP and Business Processes Some Principles 28 Adapting business processes to the ERP system Adapting ERP system to the processes Customizing Selection and implementation process Architecture of Dynamics NAV Client tier (presentation layer) Service tier or Middle tier (business logic layer) Database tier (data layer) ERP and Business Processes Add-ons and Industry Solutions 29 Dynamics NAV consists of: Dynamics NAV core by Microsoft global development Country localisation by Microsoft country development Industry solution by partner Made to measure component by partner Add-on: piece of standard software which can communicate and interact with a standard ERP system Product configurator Foodbranche HRM ERP and Business Processes Customer Model 30 ERP and Business Processes Customer Model 31 ERP and Business Processes Training and Education 32 Conceptual level (this book) Details of how the software operates Functional training The buttons Manners Through training partner Through e-training (Customer Source) ERP and Business Processes Chapter 4 33 MARKETING & SALES PROCESS: O2C CYCLE ERP and Business Processes Customer 34 Master data Contact data Transaction data Customer Card Customer posting groups ERP and Business Processes Payment Terms and Delivery Terms 35 Creditability Creditability as an amount Creditability as a period of time Payment terms: Cash on delivery 7 days 1 month (8 days) Delivery/shipment terms ERP and Business Processes Customer 36 Customer (discount) groups Characteristics in common Discounts Per customer Per item Per order E-commerce Web shop Electronic payment B2B and B2C ERP and Business Processes The Sales Process (O2C) 37 Contacting the customer Issuing Sales Quotation Sales Order processing More: • Blanket orders • Return orders and credit memos ERP and Business Processes Delivering and Shipping Billing Collecting money Contacting the Customer 38 Customer seeks contact Company seeks contact Sales promotion CRM ERP and Business Processes Issuing Sales Quotation 39 Request for Quotation (RFQ) Not always necessary Register customer data and quotation data Fast tabs Item lines Creating Quotation Send to customer Obligation to deliver Reaction period Management information ERP and Business Processes Sales Order Processing 40 Does the customer agree? Quotation is converted into a sales order. Or a direct sales order (without quotation) Creditability check Availability check (AtP, CtP) Integration with Office Release order for delivery ERP and Business Processes Delivery and Shipping 41 Warehouse gets assignments (sales orders with today’s delivery date) Picking and packing, then shipping Create shipping documents Postings in the ERP system Logistic Financial ERP and Business Processes Billing 42 Creating and sending Sales Invoice Invoice is usually made from data sales order Separation of goods and money streams Prepayment ERP and Business Processes Billing (2) 43 Event driven action: Logistical Financial Matching principle Actions Update obligations administration Update customer open debt-claim Update general ledger (financial mutation) Update stock (logstic mutation) Update VAT registration Update analyses en reports ERP and Business Processes Collecting money 44 Billing date Repayment time (not due) ERP and Business Processes Due date Past due date (overdue) Blanket Orders 45 Long term relationship with customer Usually special price or discount (or afterwards: revenue bonus) Sell a large quantity, deliver/ship (and bill) in parts ERP and Business Processes Return Orders 46 Items are damages on arrival at customer site Shipping wrong items Customer has ordered too much RMA procedure Destination of returned items Credit memo (sales) ERP and Business Processes Discounts and Credit Memos 47 Discounts because of RMA, revenue bonus, correction of mistakes Sales decides upon contents credit memo Credit memo lowers the debt-claim on the customer Detailed checks are necessary ERP and Business Processes Marketing 48 "Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders." (source: American Marketing Association (AMA) ) Macroeconomic functions: Information exchange between manufacturers, wholesalers and consumers; Stabilization function/distribution function. Product development, strategies Segmentation of the market Marketing mix ERP and Business Processes CRM 49 Customer Relationship Management Relation a company maintains with its customers Register and analyze customer behaviour Enlarge profitability and customer satisfaction Customer pyramid Pros CRM Lower costs by operational efficiency Higher revenue by better segmented market Improved strategy and better measure effects on actions ERP and Business Processes CRM (II) 50 ERP and Business Processes Analyses 51 Dimensions Business Intelligence (BI) Standard analysis possibilities Sales budgets Sales analyses reports (revenue by region, or by sales rep) Statistical screens Self designed reports In Dynamics NAV In (e.g.) Excel Examples ERP and Business Processes Chapter 5 52 SUPPLY CHAIN, PURCHASING PROCESS & WAREHOUSE PROCESS: P2P CYCLE ERP and Business Processes Vendor 53 Master data, contact data, transaction data Vendor posting groups ERP and Business Processes Trading Item 54 Master data Item number, -name and short description Base unit of measurement Sizes and weight Replenishment method Safety stock level Costing method Price data (purchase price, COGS, sales price) Product posting group Item vendor Item tracking (serial nrs/lot nrs/expiry date) ERP and Business Processes E-procurement 55 Electronic purchasing process Digital catalogue, order via Internet E-procurement versus E-commerce B2B and B2C ERP and Business Processes The Purchasing Process (P2P) 56 Purchase initiative Request for quotation and vendor selection Creation puchase order Also: • Working with blanket orders • Return shipments and credit memos ERP and Business Processes Goods receipt Vendor invoice check Vendor payment Purchase Initiative 57 Coming from sales: sales orientated Based on sales forecasts Mind inventory Sometimes customer specific purchasing ERP and Business Processes RFQ and Vendor Selection 58 Request for Quotation (RFQ) Compare conditions Which vendors make their data available to their customers? Purchasing decision: one quotation becomes a purchase order Quotation 2 Quotation 1 Quotation 3 Order ERP and Business Processes Create Purchase Order 59 Coming from quotation? Purchase order number Order confirmation Planning for the warehouse ERP and Business Processes Goods Receipt 60 Warehouse workers Determine goods receipt Determine storage location Receiving Dock Warehouse ERP and Business Processes Vendor Invoice Check 61 3-way matching Order Goods receipt Invoice Approved vendor invoice Accounts Payable (A/P) Contact with vendor if no consensus Electronic invoicing Self-billing Registration of obligations ERP and Business Processes Vendor Payment 62 Only approved vendor invoices Selection on base of due date Liquidity position Authorization Reconciliation EDI / Electronic Banking ERP and Business Processes Blanket Orders 63 Purchase order for a large quantity Several shipping moments Fully delivered? ERP and Business Processes Return orders and Credit Memos 64 Items are damaged on arrival or wrong items Ordered too many Return shipment (RMA vendor) Credit memo ERP and Business Processes Procurement of Services and Fixed Assets 65 Parallel with purchase of goods Purchasing initiative Specific expertise Budgets and budget holders Approval instead of goods receipt ERP and Business Processes Warehouse Process 66 Sales process and Purchasing process Movements (logistic transportations) Regular checks Stock-taking Separate Goods Receipt Dock Separate Shipping Dock Several warehouses / plants ERP and Business Processes SCM 67 Supply Chain Management Collaboration: competitors partners Demand Chain versus Supply Chain Technology EDI RFID ERP and Business Processes Analyses 68 Vendors Reliability of delivery times and quality Price comparison Top 10 More Discounts, status blanket orders, achievements per purchasing agent, return shipments Out comings stock-taking Item tracking and tracing ERP and Business Processes Chapter 6 69 SUPPLY CHAIN MANAGEMENT AND MANUFACTURING PROCESS ERP and Business Processes Item: Raw Material and Finished Product 70 Production: convert raw materials into finished products Finished products are not purchased, have no purchase price and no vendor data Selling finished products leads to a replenishment of raw materials Semi-finished products ERP and Business Processes BOM 71 ERP and Business Processes Routing 72 ERP and Business Processes Proper Sequence 73 Create item records for raw materials and finished products Create BOM and routing for the finished product Link the BOM and the routing to the finished item (in item record finished product) ERP and Business Processes Customer Order Decoupling Point (CODP) 74 Manufacturing semi finished items Raw materials Manufacturing finished items Semi finished items Finished items Custom er Vendor CODP 1 Make-to-stock CODP 2 Assemble-to-Order CODP 3 Make-to-Order CODP 4 Engineer-to-Order ERP and Business Processes Service companies use CCPD MTS 75 Make-to-Stock (COPD1) Produce entirely on stock Customer sales orders do not directly influence the manufacturing process Manufacturing process is based on MPS, which is built on sales forecast from the market Examples: Deep freezers Off-the-peg clothes Sanitary fittings ERP and Business Processes ATO 76 Assemble-to-Order (COPD2) Manufacture components/semi-finished items according to MTS Op base of customer sales orders final assembly: no MTS! Finished items are not manufactured on stock Customer has influence on the production process Example: Furniture with different levels of finishing touch (upholstery of cloth or leather in a number of colors and qualities) ERP and Business Processes MTO 77 Make-to-Order (COPD3) Customer sales order stretches out deep into the production process No stock production Standard materials and standard designs Longer delivery period Example: Computers with limited standard configuration possibilities ERP and Business Processes ETO 78 Engineer-to-Order (COPD4) Product specifications are not known beforehand First design, than customer specific purchasing, after that manufacturing Sometimes modular design possibilities (‘lego bricks’) Costing calculation per order necessary Examples: Luxurious yachts Made to measure clothing ERP and Business Processes Manufacturing process classification 79 Dynamics NAV: batch oriented manufacturing Flexibility in setup and use E.g. posting flushing raw materials: Manually: post the real consumption of raw material in the output journal for a specific manufacturing order; Automatic forward flushing: automatically post estimated quantity of raw material when the manufacturing order has been released; Automatic backward flushing: automatically post quantity of raw material as consumed when the manufacturing order is completed. ERP and Business Processes Product versus Job (Project) 80 A job is an entity on which you can register labor hours, machinery hours and raw material consumption, it is a unique task, outlined in time and resources and is completed with a job result. Plan and register resources and materials Stages Job journal Integration between manufacturing, logistics, sales and finance ERP and Business Processes Manufacturing Process: Preparation 81 Master data Materials, BOMs, routings Available capacities of resources and materials Work shifts Shop calendars Activity centers: work center group, work center, machine center Production order status Planned Fixed planned Released Finished ERP and Business Processes MTS and MRP 82 Sales forecasts Production plan Sales and Operations Plan (SOP) more details Detailed planning (production schedule) MRP run Example MRP run with spreadsheet calculation Manufacturer of liquorices ERP and Business Processes Starting position in Excel 83 ERP and Business Processes MRP: the example 84 Gross need only of sugar Capacities are used in basic setting In daily practice it is much more complex Grasp stock ERP and Business Processes Manufacturing Orders MTO 85 First the sales order has to be received 1 sales order is 1 manufacturing order Combine sales orders of one given item and periodically generate a manufacturing order Materials Stock materials Specials ETO: usually generate released production order immediately after creating the sales order ERP and Business Processes R&D and PLM 86 Research & Development R&D budget job card Product design (engineering) not only in ERP Product configurations Engineering systems, an overview CAD systems (computer aided design) EDM systems (electronic document management) PDM systems (product data management) PLM systems (product lifecycle management) ERP and Business Processes Product Configurator 87 Add-on Flexibel assemble products Built in intelligence and use of wizards Dynamically determine BOM and routing Sometimes offer to consumers via the web Integratie with ERP is crucial ERP and Business Processes Service Management 88 After Sales Service Warrantly issues Controlling repair and maintenance at customer sites Service contracts Spare parts management ERP and Business Processes Analyses 89 Product design Where are components used, comparison BOMs Capacities Work per work center/machine center, Gantt diagram Planning Availability of materials Execution Material shortage list Valuation Production order statistics, cost calculation ERP and Business Processes Chapter 7 90 FINANCIAL MANAGEMENT PROCESS ERP and Business Processes Financial Management 91 Event driven approach (EPC’s) General Ledger (G/L) Balance sheet and Profit and Loss Statement (P&L) Posting groups Business posting group Product posting group VAT Business posting group Number series ERP and Business Processes Posting Groups General posting groups 92 Steering of G/L accounts Listed on PRODUCT-P-GRP BUSINESS-P-GRP Revenue and Cost of Sales Item Card, Vendor Card | Customer Card, Resource Card VAT posting groups Steering of G/L accounts Listed on VAT-PRODUCT-P-GRP VAT-BUSINESS-P-GRP Purchase VAT and Sales VAT Item Card, Vendor Card | Customer Card, Resource Card Specific posting groups Steering of G/L accounts Listed on CUSTOMER-P-GRP Accounts Receivable accounts Customer Card VENDOR-P-GRP Accounts Payable accounts Vendor Card FIXED ASSET-P-GRP Fixed Assets accounts Fixed Asset Card BANK ACCOUNT-P-GRP Bank accounts Bank Account Card INVENTORY-P-GRP with location code Inventory accounts Item Card ERP and Business Processes Registrations from other Processes 93 Integration EPC’s Also direct postings General journal Recurring journal ERP and Business Processes Money Transfers 94 Elektronic banking (form of EDI) Payment process integrated in Financial management Generate payment proposition Payment order(EFT) Autorisation Reconciliation Liquidity position Overview Budget ERP and Business Processes Corporate Governance and External Reporting 95 Corporate Governance = good enterprise management Strong, legal claims External reporting Also strong, legal claims, international standards (IFRS) More and more digitally published (XBRL) Use the latest version of the software! ERP and Business Processes Internal Reporting and BI 96 Internal reporting aims at enterprise management Steering Accountability Reports Lists and documents Account schedules BI Not only from strategic point of view Easy export from Dynamics NAV to Excel (wizards) ERP and Business Processes BBSC 97 Business Balanced Score Card CSFs PIs BIW ERP and Business Processes Controller and ERP 98 Controller is financial specialist Setup and use of processes, procedures Thinking in processes Information delivery (budget versus realisation) Important decision maker in an ERP implementation ERP and Business Processes Dimensions 99 Characteristics (properties) which can be attached to certain postings Offer availability of sorting and analysis In journals, documents and budgets Cost center, cost unit, region, etc. Reports in Dynamics NAV Dimensions-totals report Dimensions-detail report Enterprise specific dimensions-detail report ERP and Business Processes Participations and Intercompany Transactions 100 Related enterprises, where one company owns (a large part of) one or more other companies Consolidation Elimination postings Invoices which have to be charged to other group companies A/R intercompany ERP and Business Processes Segregation of Duties, Roles and Authorization 101 Assign roles in a business process on basis of antipoles of interest Example: warehouse versus sales Login accounts – roles – authorization – permissions Predefined roles (profiles) in Dynamics NAV ERP and Business Processes Fixed Assets 102 Durable production resources Real estate, computer systems, cars, machines, shop inventory and so on Depreciation Write ups (revaluations) Insurance, maintenance, cost budgeting, salvage ERP and Business Processes Chapter 8 103 HUMAN RESOURCE MANAGEMENT ERP and Business Processes The HRM Process 104 Recruitment and selection Commencement of employment ERP and Business Processes Compention management Assessment Resignation Payroll Master Data HRM 105 Name, address, bank account, date of birth, social security number, employment/resignation date, type of albor contract Employee card ERP and Business Processes Recruitment, Selection and Commence of Employment 106 Standard Dynamics NAV and add-on From vacancy to recruitment, selection to commence of employment: process support Personnel is important element for every company Recruitment costs Training ERP and Business Processes Competence Management and Assessment 107 Qualifications and competences Training and development Job evaluation conversation Assessment interview Competence management Not in standard Dynamics NAV ERP and Business Processes Absence Registration 108 Register absences in Dynamics NAV Cause Description Add-on: more possibilities ERP and Business Processes Payroll 109 Specialistic task Often outsourced Functionalities payroll: All data regarding payroll tax; Pension regulations; Minimum wages, contractual savings; Holiday pay; Salary components; Payroll calculations of very diverse matter; Pay slips, annual reports for employees and IRS; Interface to MS Office; Salary payments via electronic banking; G/L postings of salaries. ERP and Business Processes Workflow Management 110 Workflow, work process Documents (elektronically) Manage the workflow Examples Insurance company Request for leave, handling expense sheets ERP and Business Processes Relations with other Processes, Analyses 111 HRM and resources Jobs (projects) and production Integration of processes and data Reporting for HRM Dimensions BI ERP and Business Processes Chapter 9 112 IMPLEMENTATION AND CHANGE MANAGEMENT ERP and Business Processes Implementation 113 Configuration, setup Before start of use of ERP system Colaboration with consultants Key-users Implementation plan Methodologies: RIM Toolkit and SureStep Process modeling Cost and time frame ERP and Business Processes Master Data Management 114 Streamline use of master data for the entire conglomerate of companies All companies have to confirm to the standard Example coffee cups ERP and Business Processes Change Management 115 Principles Change Management: Management has clear vision of the future; Management has to support the change fully; There are advocates, but also opponents we have to deal with; Correct communication will encourage the transition to a new situation. Cultural and structural side in balance Sounding board, support Committees and groups ERP and Business Processes Version Management, Upgrades and Updates 116 Keeping up to date Hot fix, update and upgrade Made to measure software and upgrading Develop – test – go live License costs ERP and Business Processes Service Oriented Architecture (SOA) 117 No wall-to-wall system Components communicating with each other, with components of other brands Web services (portals) Mobile ERP and Business Processes