Week 7:
Enterprise Information
Systems
MIS 2101: Management Information Systems
Agenda

Graham Cracker Video

Introduction to Enterprise Systems

Enterprise Resource Planning

Introduction to SAP


2
Class Project
Midterm Exam
Functional Business Model

Alfred P. Sloan developed the functional organizational
model in the 1930s as chairman of General Motors

The functional model was very successful for decades,
but foreign competition in the 1980s highlighted
problems with the model:
 Flexibility and rapid decision-making were not
possible
 Organizations had become overstaffed and top-heavy
 Ability to respond to change was limited
3
4
Material & Product Flow
Information and material flows in a functional business model
Finance & Accounting
Information Flow
Logistics
Information Flow
Manufacturing
Information Flow
Sales
Information Flow
Marketing
Information Flow
Top Management
Legacy System Approach
5
Business Process Model

In a process-oriented company, the flow of
information and management activity are
“horizontal”—across functions

The “horizontal” flow promotes flexibility and
rapid decision-making

Michael Hammer’s Reengineering the
Corporation encouraged managers to take
a “horizontal” business process view of their
companies
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Process View of Business
Logistics
Function
Production
Function
Purchasing
Function
Accounting
Function
Sales
Function
Customer Order Process
Material Order Process
A process view of business
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Enterprise System Approach
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Integrated Database
Enterprise Resource
Planning

Enterprise resource planning (ERP)
– integrates all departments and
functions throughout an organization
into a single IT system

enterprise-wide decisions by viewing
enterprise-wide information
9
Manufacturing Roots of ERP

Materials Requirements Planning (MRP) software was
developed in the 1960s and ‘70s

MRP software allowed firms to start with a sales forecast
and develop production and raw material plans
 For companies with many products, raw materials and
shared production resources, MRP was not possible
without a computer
 Electronic Data Interchange (EDI) allowed a company to
communicate its purchase requirements electronically
 Sharing long-range production schedules between
manufacturers and suppliers was the beginning of supply
chain management (SCM)
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Enterprise Resource Planning

Large ERP vendors include
 SAP
 Oracle

ERP Core Components
 Financial Management
 Operations Management
 Human Resource Management

ERP Extended Components
 Supply Chain Management (SCM)
 Customer Relationship Management (CRM)
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Enterprise Resource
Planning

“Ground up” integration of business
processes

A single application ties together multiple
business functions


Accounting, purchasing, HR
Applies “best practices” to these processes
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Enterprise Resource
Planning

Architecturally…



The ERP system contains the central database
Business units utilize the central system
All must conform to the data and procedural
standards of the application

Configuration is notoriously difficult

Implementations are notoriously complex
13
ERP Vendors

Consolidation is currently taking place in the
ERP software business




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PeopleSoft purchased ERP vendor J.D.
Edwards in 2003
Oracle, after a long battle, acquired
PeopleSoft in 2005
SAP and Oracle are now the two largest
ERP vendors
Microsoft is challenging SAP and Oracle to
sell ERP systems to small- and mediumsized businesses
Best of Breed Approach

Best of Breed approach: implement ERP modules from
different vendors based on actual or perceived
advantages

The Best of Breed approach may become obsolete
due to implementation challenges
 Software must be written to connect different systems
 Upgrading modules is more complicated with multiple
vendors
 Real-time data integration is frequently not available
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ERP Benefits

Real Benefits




Costs


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IBM can reprise its product inventory in five
minutes rather than five days
A company takes half a day to generate
financial statements instead of several days
Sales people can give accurate quotes in 15
mins rather than several hours
Large Company - $50 - 500 mn
Midsize company - $10 – 20 mn
ERP for Midsize Companies

By 1998, most Fortune 500 companies had installed ERP systems

ERP companies began to focus on midsize companies (1,000 or
fewer employees)

Midsize companies in Europe have an estimated $50 billion annual
IT budget


To capture the midsize market, SAP developed Industry
Solutions—preconfigured versions of its R/3 software for specific
industries such as:


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IT budget for US midsize companies is even larger
Oil and gas, automotive, banking, chemicals, etc.
Application hosting also makes ERP more attractive for midsize
companies
The Formula for Enterprise
System Success
1.
Secure executive sponsorship

Most failures due to lack of top-level management support
2.
Get help from outside experts

Consultants are specifically trained

Implementation tends to happen faster
3.
Thoroughly train users

Most overlooked, underestimated and poorly budgeted expense

Training can prevent dissatisfaction
4.
Take a multidisciplinary approach to implementations

Include end users from all functional areas in the implementation
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SAP
SAP
Systeme, Anwendungen, Produkte in
der Datenverarbeitung, or
 Systems, Analysis and Products in
Data Processing.
 Largest software company in Europe

Third largest in the world
 After Microsoft, IBM

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Architecture

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SAP R/3 system is based on Client/Server architecture
that is comprised of three tiers:

Presentation server: Your local PC that has SAPGUI.

Application server: The application server is used to run
the business application programs in the R/3 client/server
concept. The application modules are loaded from the data
base server to the application server as required. Thus the
application server requires only storage capacity to
accommodate UNIX, Swapping and the SAP runtime
environment.

Database server: The data base server stores the SAP
application programs and data in the R/3 client/server
concept. It also handles the SAP update program and batch
jobs.
SAP R/3 Enterprise
•The R/3 architecture is comprised of application
and database servers.
SD
CO
MM
PP
QM
•The application servers house the software and
the database servers handle document updates
and master file databases.
FI
AM
R/3
Client / Server
PM
WF
HR
IS
•Variety of Hardware and Software Architectures
• SAP can use a number of database programs
to actually store the data.
Oracle
DB2
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PS
SAP R/3 Enterprise

FI - The Financial Accounting module is the computerized 'book of records'. It is
designed for managing general ledgers, accounts payable, fixed assets and external
reporting. It is the integration point that most system components relate in one way or
another.

CO - Controlling module manages the flow of costs and revenues. It facilitates an
organization's internal planning, management and decision making process. It is tightly
integrated with other system components. It collects transactions from the other
modules, using related data for internal accounting, reporting and management of funds.

AM - Asset Management module tracks, values, depreciates and also records
purchases and sales of a company's assets.

PS- Project Systems module is used for grants, contracts and plant fund functioning.
Project Systems module helps with the planning, managing, controlling and figuring the
costs of research and development.

WF Workflow--links the integrated SAP application modules with cross-application
technologies, tools and services

IS Industry Solutions--combine the SAP application modules and additional industryspecific functionality. Special techniques have been developed for industries such as
banking, oil and gas, pharmaceuticals, etc.
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SAP R/3 Enterprise

HR - This is an integrated system that supports planning and administration of personnel
activities; everything from hiring to separation or retirement. Employee records, payroll,
benefits and time recording are all handled in Human Resources module.

PM - Plant Maintenance module maintains the company's equipment, labor, material
and work time.

QM - Quality Management module aims to improve the quality of the company's
goods. Planning, execution, inspections and certificates are examples of activities
processed in QM.

PP - Production Planning module manages your company's production process,
including capacity planning, master production planning, material requirements planning
ans the study of shop floor.

MM - Materials Management module supports the procurement function occuring in
day-to-day business operations. It underpins the supply chain, processing purchase
orders and goods receipts.

SD - Sales Distribution module deals with the whole process from production to
delivery, including sale orders, pricing, picking and other warehouse processes such as
packing and shipping.
CA - Cross Applications module lies on top of the individual modules and manages
the workflow, business information warehouse, office and workplace, industry solutions
24 and new dimension products.
.

Benefits of SAP R/3

Worldwide Usage







Open System



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Comprehensive multi-currency translation
Multiple language support
Customized reporting and document generation for individual
countries
Multi-company support
Local support in most major industrialized countries
Country specific functionality
R/3 allows the interplay and portability of applications, data and
user interfaces
Based on international standards for interfaces, services and
data formats
Architecture is aligned with recognized open systems
standards
Benefits of SAP R/3

Designed for all Types of Business


Provides a complete business solution across all
business functions.
System addresses critical business processes and
provides an enterprise-wide solution:
• One system supports global business and accounting
practices.
• Standardized business processes across the
organization, yet tailoring by individual business units is
allowed.
• Supports multiple business structures per business
process to accommodate differences between business
units
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Benefits of SAP R/3

Integration

Integrated Processes
• Operational. financial, and managerial principles are satisfied
simultaneously
• Common Database

Application Integration
• One point of data entry
• Consistency across all user applications

Technical Integration
• On-line interactive edit and update
• Elimination of redundant data
• Data Integrity

Real-Time Processing

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Transactions within system update the underlying
databases immediately
Benefits of SAP R/3

Flexibility






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Customers can customize business modules
to realize best business practices
System provides necessary interfaces to
incorporate external software.
Scalability, accommodates acquisitions and
growth
System can be configured the way you want
to do business in the future
Allows customized screens processing and
reports
System runs on multiple hardware platforms
SAP vs. MS Office
Database and
Application
Server
Nothing is saved on your PC. Only things saved on our
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server in Missouri are saved, and they are saved for good.
Master Data

Master data is relatively fixed



Material Master Data
Vendor Master Data
Customers Master Data

Before making the master data
configurations, you must have completely
defined the organizational structures

Changes as policy changes
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Transaction Data

Includes internal and external exchanges
that describe business activities

Unlike master data, aggregate transactional
data is dynamic – each transaction is
unique

Stored at various stages of a business
process

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Customer orders, purchase orders,
production orders, customer payments
Saving in Windows vs. SAP

In SAP, there are very few delete options:

Don’t save if things don’t look 100% correct!
Exit the transaction and start over
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Data Set Number (##)
I am data set number 00, not you!
 Make sure you use your number when you
see ## in the exercises

Enter Cred. Contr. area ##CR
and Currency USD
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The Marketing Function

What is the role of Marketing (4 Ps)

Product: What products to produce

Promotion: How the products are to be promoted
and advertised

Place: How the products should be distributed for
maximum customer satisfaction

Price: What price should be charged for the products
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The integration of marketing
with sales order and accounting

Example: Pricing
Automatically compute prices for a
customer
 Based on sales history and customer
attributes
 Based on payment history (from accounting)


Facilitates “price discrimination”
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Pricing in SAP
Net price for
order, including
discounts
Base price is
$240/case
The production
cost of the 10
cases is $1,992
Discount is 10
percent
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Price Discounts in SAP
If a line in
the order is
over $1000,
the discount
is 5 percent
If a line in
the order is
over $1500,
the discount
is 10 percent
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Stages in Customer
Relationship
 Prospecting

Potential new customers are evaluated and
development activities (e-mails, sales calls,
mailings, etc.) are planned
 Acquiring
Salespeople develop business prospects
into customers
 Sales tasks (processing inquiries, quotes,
and sales orders) become increasingly
important in this phase.

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Stages in Customer
Relationship
 Servicing

Technical support, warranty work, product
returns, quality problems, complaint handling
 Retention

The rate at which a prospect becomes a
customer is low, so retention is critical
• It is easier to retain good customers than to find
new ones

Anticipate changes in customer requirements
39
Customer Relationship
Management

Helps a company streamline interactions with
customers and make them consistent

Goal is to provide a “single face to the customer”
 Any employee in contact with a customer should have
access to all information on past interactions
 Information about a customer should reside in the
ERP system, not with the employee

CRM also provides a company with tools to analyze
the vast quantities of sales data available from the
ERP system
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Core CRM Activities

One-to-One Marketing:
 Customers are categorized and products, promotions, and pricing
are tailored accordingly.
 Sales may be increased by cross-selling and upselling

Sales Force Automation (SFA):
 New customers are automatically routed to the appropriate sales
representative
 Customer needs are forecasted based on the customer’s history
and transactions

Sales Campaign Management:
 Helps a company organize a marketing campaign and compile its
results.
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Core CRM Activities
(continued)

Marketing Encyclopedias:



Database of promotional literature
Material can be routed to sales representatives or
customers as needed
Call Center Automation:


Customer support can be improved with the
assistance of a knowledge management database
New solutions to unique customer query can be added
to the knowledgebase, making it “smarter”
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Example: Campaign Planning
Marketing and Campaign
Planning
Target Group Selection
•Modeling
•Segment creation
•Selection
•Planning
•Budgeting
•Monitoring
Campaign Analysis
Phone
Web
Mobile e -mail
BW
Campaign Execution
Activity Management
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• Success
Measurement
• 3rd Party Data
• Profiles
Benefits of CRM

Lower costs:
 Better response times in call center operations and better use of sales force
time lowers costs.

Higher revenue:
 Segmenting customers provide improves selling, increasing revenues.

Improved strategy and performance measurement:
 With CRM in place, management can think about different performance
measures:
• Should salespeople be rewarded for exceeding sales quotas and marketing
people rewarded for finding new customers?
• Should both receive rewards that are based on some measure of customer
satisfaction?

CRM can lead to all personnel thinking in terms of a company-wide effort to
satisfy customers.
44
CRM Success and Failure

CRM is often incorrectly viewed as a technology
implementation driven by the IT department


CRM should be viewed as a business strategy!
Examples of what CRM systems can do


Volvo Cars of North America is using predictive
modeling to find new customers
Financial companies are using CRM to move from
being one-time sellers to selling a range of financial
products
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Sales and Order Processing
46
Distribution Channel
Sales
Organization
Distribution Channel
Wholesale

Retail
Direct
The way sales materials reach the customer.
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Division
Sales
Organization
Product
Line 1

Divisions
Product
Line 2
Product
Line 3
Divisions are associated with product lines
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Sample Sales Order
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Customer Order Cycle
2
1
1
Pre-Sales Activities
Sales Order Processing
Inventory Sourcing
Payment
Billing
3
50
3
Delivery
2
Exercise

In groups of 4-5 students, pick one of
the stages in customer order cycle
and analyze the following:
Information Generated
 Information Required from other
stages (or other functions)
 Typical Problems due to untimely
information

51
The Whole Process
Pre-Sales
Contact
Inquiry
Quotation
Order
Inventory Sourcing
Delivery/
Transportation
Billing
Payment/
Accounting
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Delivery
Goods issue
Transfer Order Shipment
Invoice
Accounts Receivable
Material Stock
Account
Production Planning
Sales Information System
Sales Order
Processing
Materials Management
Contract
Scheduling
agreement
Exercise

SAP Exercise on Sales Order
Processing in Project 2.

Points to Note
How documents are linked to one
another
 How data entry is made from Master
Databases

53
Avoiding Errors in Order Entry
Clicking on
Sold-to party
field produces a
search icon.
Clicking on the
search icon
calls up a
search window
with numerous
search options
54
Availability Control
Three options proposed
by SAP R/3
55
Document Flow
Accounting
Document
90000002 is
linked to sales
order 5
56
Summary

We know that “un-integrated” information systems result in
inefficencies
 …and a more costly sales order process
 Information is not shared in real-time so customers are asked to
repeat initial sales order information.
 As order is processed, errors in pricing, credit checks, and
invoicing also occur, presenting a poor company image to
customers.

Integrated ERP software avoid errors because all customer data
are stored in a central database
 ERP systems see sales as a set of related functions
 All these transactions are electronically linked
 Tracking an order’s status (partial shipments, returns, partial
payments,
and so forth) is easily accomplished
57

58
Questions!!!