Graduate Program in Business Information Systems BIS 581 Business Process Management Lectures 9-10 Aslı Sencer Department of Management Information Systems Business Process Management – 9-10 Integration with ERP Systems Outline • • • • • • Types of Enterprises Systems Types of Data in ES SAP Overview Procurement Process Key Concepts and Assumptions Conceptual Framework – – – – Physical Flow Document and Data Flow Information Flow Financial Impact Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 3 Enterprise Systems • Three stages of evolution – Stage 1: Stand-alone Mainframe Systems – Stage 2: Client-Server Architecture – Stage 3: Service-Oriented Architecture (SOA) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 4 The New Stack – Process Is the Next Platform Client Punch Card or Terminal (10’sCustom of users) PC or Internet Any Device (1000’s of users) (Millions of users) Composites Application Data Management Application Application Application OS OS OS Composites Application OS and Database Mainframe DB OS Client Server Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 OS OSApplications OS OS DB OS DB OS DB OS OS OS OSApplications OS OS DB OS DB OS DB OS OS SOA 5 3-tier Client Architecture Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 6 Types of Enterprise Systems • The ES Application Suite – Enterprise Resource Planning (ERP) – Supply Chain Management (SCM) – Supplier Relationship Management (SRM) – Product Lifecycle Management (PLM) • Other classifications – Best of breed vs. Niche applications – Software as a service (SaaS) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 7 ERP Systems • Evolved in 1990’s in parallel to advances in BPR and globalization. • ERP’s are the world’s largest and most complex ES’s. • Focus on internal operations of an organization, integrate functional and cross functional (intracompany) business processes. • Typical ERP systems include – – – – – Operations (production) Human resources Finance and Accounting Sales and Distribution Procurement 8 Management of intercompany processes: SCM and SRM • SCM connects the companies that supply the materials it needs to make its products. • SCM help companies plan for their production demand requirements and optimize complex transportation and logistics for materials. • SRM systems manage the overal relationships with the material suppliers. • SRM systems contain functonality to manage the quotation and contracts processes. 9 CRM and PLM • CRM systems connect a company’s ERP system to those of its customers. • CRM systems provide companies with capabilities to manage marketing, sales and service for its customers. • PLM systems help companies administer the process of research, design and product management. 10 The application suite Example: SAP, Oracle Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 11 SAP ERP Solution Map End-User Service Delivery Analytics Financials Product Development and Manufacturing Sales and Service Corporate Services Treasury Talent Management Financial Accounting Workforce Analytics Management Accounting Workforce Process Management Corporate Governance Workforce Deployment Procurement Inventory and Warehouse Management Inbound and Outbound Logistics Transportation Management Production Planning Manufacturing Execution Product Development Life-Cycle Data Management Sales Order Management Real Estate Management Enterprise Asset Management Aftermarket Sales and Service Professional-Service Delivery Project and Environment, Health, Travel Quality Global Trade Portfolio and Safety Management Management Services Management Compliance Mgmt. Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 12 SAP NetWeaver Procurement and Logistics Execution Financial Supply Chain Management Operations Analytics Shared Service Delivery Human Capital Management Financial Analytics SAP Supply Chain Management Demand & Supply Planning Procurement Manufacturing Warehousing Transportation Real World Awareness Supply Chain Visibility Supply Network Collaboration Supply Chain Management with Duet Copyright SAP AG 2008 Supply Network Planning Distribution Planning Service Parts Planning Strategic Sourcing Purchase Order Processing Invoicing Production Planning & Detailed Scheduling Manufacturing Visibility & Execution & Collaboration MRP based Detailed Scheduling Inbound Processing & Outbound Processing Receipt Confirmation Sales Order Processing Billing Planning & Dispatching Freight Management Supplier Collaboration Physical Inventory Service Parts Order Fulfillment Rating & Billing & Settlement Supply Chain Event Management Strategic Supply Chain Design Warehousing & Storage Cross Docking Driver & Asset Management Network Collaboration Auto ID / RFID and Sensor Integration Supply Chain Analytics Supply Chain Risk Management Customer Collaboration Sales & Operations Planning Outsourced Manufacturing Demand Planning in MS Excel Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 13 SAP NetWeaver Order Fulfillment Demand Planning & Safety Stock Planning Forecasting SAP Supplier Relationship Management Purchasing Governance Global Spend Analysis Category Management Compliance Management Sourcing Central Sourcing Hub RFx / Auctioning Bid Evaluation & Awarding Collaborative Procurement Supplier Collaboration Supply Base Management Legal Contract Repository Contract Authoring Self-Service Procurement Contract Negotiation Services Procurement Contract Execution Direct / Plan-Driven Procurement Contract Monitoring Catalog Content Management Web-based Supplier Interaction Direct Document Exchange Supplier Network Supplier Identification & Onboarding Supplier Development & Performance Management Supplier Portfolio Management Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 14 SAP NetWeaver Contract Management SAP Product Lifecycle Management Product Strategy and Planning Product Development and Collaboration Engineering, R&D Collaboration Product Data Management Service and Product Master and Specification and Maintenance Structure Structure Management Recipe Management Management PLM Foundation Product Compliance Product Portfolio Management Supplier Collaboration Product Intelligence Innovation Management Manufacturing Collaboration Product Costing Requirements Management Service and Maintenance Collaboration Product Quality Management Visualization and Publications Tool and Workgroup Integration Project and Resource Management Market Launch Management Product Change Management Configuration Management Document Management Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 15 SAP NetWeaver Product Management SAP Customer Relationship Management Segmentation & List Management Campaign Management Real-Time Offer Management Sales Sales Quotation & Territory Accounts & Opportunity Planning & Performance Order Management Contacts Management Forecasting Management Management Service Service Order Complaints & Contract Management Returns Management In-House Repair Pricing & Contracts Lead Management Incentive & Commission Management Case Installed Base Warranty Management Management Management Time & Travel Resource Planning Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 16 Business Communication Management Marketing Resource Management Trade Promotion Management Interaction Center Service Web Channel Sales Partner Channel Management Marketing Other classifications of ERP systems Today’s global comanies typically have an ES lanscape that includes custom and packaged applications from several vendors • Best of Breed Applications: Isolated to one process or part of a process that evolves from departmental applications Ex: i2 is a popular SCM system. Ariba is a popular procurement system. • Niche applications: Small and independent software vendors offer highly specialized niche app’s. Ex: Vendova is a small ISV that produces a pricing management tool to assist retailers in maximizing profit for retail sales. It pulls product and price info from several ES’s. • Other classifications: – Size of enterprise: SAP and Oracle for companies with more than 1000 employees – Method of delivery: Install the hardware and software in the facility (three-tier or SOA configurations) versus salesforce.com and Netsuite deliver ES entirely from web. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 17 Types of Data in ES • Organizational Data • Master Data • Transaction Data Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 18 Organizational Data • Define the organizational structure of the enterprise • Includes definitions of: – – – – – – Companies (subsidiaries, etc.) Divisions based on, product or geographical hierarchy Sales organizations Purchasing organizations Physical facilities: plants, warehouses, distribution centers HR organization: Functional areas, reporting relationships • Data rarely changes Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 19 Master Data • Define key entities in an organization • Customers – Basic information: name, address, contact information – Financial information: payment terms, methods – Sales information: delivery terms • Vendors / suppliers – Similar information as customer • Products – – – – Basic data: description, weight, color Purchasing data Sales data Manufacturing data Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 20 Master Data • Employees – Basic data – Personal data: dependents – Payroll data – Tax data • Data changes occasionally Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 21 Transaction Data • Data that is the consequence of day-to-day transaction – Who, what, when, where, how, how much • Sales – Customer, products, quantities, dates and times, location (shipping, delivery), sales person • Purchase – Vendor, products, quantities, dates and times, location (delivery), sales person, requester • Production – Materials, quantities, facilities, resources (machine, people), dates and times, locations (storage, production) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 22 Super Skateboard Builders, Inc. • • • • • • • History Product Line Customers Vendors Plant Layout Employees Information Systems Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 23 SSB, Inc. - Product List Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 24 SSB, Inc. - Customer List Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 25 SSB, Inc. - Vendor List Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 26 SSB, Inc. - Plant Layout Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 27 SSB, Inc. - Organizational Chart John Z. Boeve (President) Maria Rivera (Office Manager) Catherine VanderBos (Plant Manager) Patrick Stevens (Sales Manager) Shana Smith (Accountant) David Bloomberg (Warehouse Manager) Charles Skivers (Shop Floor) Martha Seward (Purchasing Manager) Tom Jones (Warehouse) Mark McKendry (Shop Floor) Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 28 SAP Overview Copyright SAP AG 2008 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 29 Physical Flow • • • • • What is the trigger? What are the steps? What is the purpose of each step? Who is involved in each step? How is communication and coordination accomplished Magal and Word | Essentials of Business Processes and Information Systems | © 2009 30 Procurement Process: Physical Flow Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 31 Document flow • • • • • • Purchase Requisition Purchase Order Packing List Goods Receipt Document Vendor Invoice and Payment Key questions regarding documents – What is the purpose? – What are the key data? • General: Who, when, what, where • Process / step specific: varies – How does data change across the process? – Who is responsible for the data? Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 32 Purchase Requisition Filled later by the purchasing department, based on the purchase order form. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 33 Purchase Order Materials may be shipped via ground shipment (trucs, etc.), air, train, sea. Free-on-board (F.O.B ) point is the point at which ownership of the shipped material legally transfers from one company to the other. F.O.B. Point is either the shipping point or the destination. Payment Terms define how the company will pay the vendor. Net nn: nn specifies the number of days within which payment for the full amount of the invoice is due. x% mm/Net nn: x% discount is made if the payment is made within mm days; otherwise, full payment should be made within nn days. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 34 Packing List When the vendor sends the shipment, a packing list or delivery document will accompany it, showing the details about the materials in the shipment. It does not include pricing information. Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 35 A Goods Receipt Document Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 36 A Vendor Invoice Once the shipment is sent, the vendor will send an invoice, or bill for the material shipped to the accounting department for payment. Three-way match: The corresponding purchase order document, goods receipt document and invoice are matched. If the match is OK, the payment is made by check or Electronic funds transfer (EFT) Note of the Accounting Manager after the payment is made: Paid in full Check # 25846 8/1/08 Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 37 Information Flow • Instance-Level Information – Status of a purchase requisition / order – Has a requisition been acted on? Has a PO been created and sent – Have goods been received for the requisition / order? When? Where are the goods? – If received, has an invoice been received? Paid? – If not received, when can we expect the goods? Ex: David wants to know the state of the purchase requisition he sent to Martha • Process-Level Information – – – – How well is the process doing? How much time does it take on average? Per material? Per vendor? Which vendors are prompt? Who habitually delivers late? What do we buy most often? From with vendor(s)? Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 38 Financial Impact • Impact on balance sheet and income statement accounts • Example: Procure $500 in materials. Process step B/S I/S Purchase requisition Purchase order Goods receipt Vendor Invoice receipt Vendor payment Magal and Word | Essentials of Business Processes and Information Systems | © 2009 39 Role of enterprise systems in the procurement process • Execute the Process – Create Purchase Requisition – Create Purchase Order – Receive Shipment – Receive Invoice and Send Payment • Capture and Store Process Data • Monitor the Process – Instance-Level Information Flow – Process-Level Information Flow Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 40 Enterprise systems in Procurement Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 41 Purchase Requisition in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 42 Purchase Order in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 43 Goods Receipt in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 44 Invoice Receipt in SAP Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 45 Vendor Payment in SAP – Initial Screen Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 46 Vendor Payment in SAP – Processing Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 47 Process monitoring (Information flow) • Instance level – status information – Status of a purchase requisition / order (PO history) • Process level – aggregate information – How is the process doing? Magal and Word | Essentials of Business Processes and Information Systems | © 2009 48 Purchase Requisition History Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 49 Purchase Order History Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 50 Process-Level Information Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 51 Exercise Using Simulated SAP • The exercises will require you to complete the steps in the procurement process that have been discussed in this chapter. In particular you will: – Create a purchase requisition for a number of trading goods – Convert the requisition to a purchase order – Enter a goods receipt into the system – Enter a vendor invoice into the system – Record a payment to the vendor Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 52