Week 7: Enterprise Information Systems MIS 2101: Management Information Systems
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Week 7: Enterprise Information SystemsMIS 2101: Management Information Systems
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Agenda
Graham Cracker Video
Introduction to Enterprise Systems
Enterprise Resource Planning
Introduction to SAP Class Project
Midterm Exam
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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
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Top ManagementM
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Material & Product Flow
Information and material flows in a functional business model
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Legacy System Approach
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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
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Material Order Process
Customer Order Process
A process view of business
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Enterprise System Approach
Integrated Database
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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
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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 functionsAccounting, 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
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ERP Vendors
Consolidation is currently taking place in the ERP software business 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 medium-sized businesses
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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 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
Costs Large Company - $50 - 500 mn Midsize company - $10 – 20 mn
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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
IT budget for US midsize companies is even larger
To capture the midsize market, SAP developed Industry Solutions—preconfigured versions of its R/3 software for specific industries such as:
Oil and gas, automotive, banking, chemicals, etc.
Application hosting also makes ERP more attractive for midsize companies
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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
SAP
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SAP
Systeme, Anwendungen, Produkte in der Datenverarbeitung, or
Systems, Analysis and Products in Data Processing.
Largest software company in Europe Third largest in the worldAfter Microsoft, IBM
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Architecture
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.
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SAP R/3 Enterprise
OracleDB2
R/3R/3Client / ServerClient / Server
COCO
AMAM
PSPS
WFWF
ISISHRHR
SDSD
PPPP
QMQM
FIFI
PMPM
MMMM
•The R/3 architecture is comprised of application and database servers.
•The application servers house the software and the database servers handle document updates and master file databases.
•Variety of Hardware and Software Architectures
• SAP can use a number of database programsto actually store the data.
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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 industry-specific 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 and new dimension products.
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Benefits of SAP R/3
Worldwide Usage 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
Open System 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
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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 Transactions within system update the underlying databases
immediately
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Benefits of SAP R/3 Flexibility
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
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SAP vs. MS Office
Database andApplication
Server
Nothing is saved on your PC. Only things saved on ourserver in Missouri are saved, and they are saved for good.
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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 Customer orders, purchase orders,
production orders, customer payments
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In SAP, there are very few delete options:
Don’t save if things don’t look 100% correct! Exit the transaction and start over
Saving in Windows vs. SAP
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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: PricingAutomatically 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
Discount is 10 percent
The production cost of the 10 cases is $1,992
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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
ProspectingPotential new customers are evaluated and
development activities (e-mails, sales calls, mailings, etc.) are planned
AcquiringSalespeople develop business prospects
into customersSales tasks (processing inquiries, quotes,
and sales orders) become increasingly important in this phase.
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Stages in Customer Relationship
ServicingTechnical support, warranty work, product
returns, quality problems, complaint handling
RetentionThe 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 onesAnticipate changes in customer requirements
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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 PlanningTarget Group Selection
• Modeling• Segment creation• Selection
BW
Campaign Analysis
• Success Measurement
• 3rd Party Data• Profiles
Phone Web Mobile e-mail
Campaign ExecutionActivity Management
Marketing and CampaignPlanning
• Planning• Budgeting• Monitoring
Target Group Selection
• Modeling• Segment creation• Selection
BW
Campaign Analysis
• Success Measurement
• 3rd Party Data• Profiles
Phone Web Mobile e-mail
Campaign ExecutionActivity Management
Marketing and CampaignPlanning
• Planning• Budgeting• Monitoring
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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.
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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
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Distribution Channel
The way sales materials reach the customer.
SalesOrganization
Distribution Channel
Wholesale Retail Direct
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Division
Divisions are associated with product lines
DivisionsProduct Line 1
Product Line 2
ProductLine 3
SalesOrganization
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Sample Sales Order
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Customer Order Cycle
Pre-Sales ActivitiesSales Order Processing
DeliveryBilling
Inventory Sourcing
Payment
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Exercise
In groups of 4-5 students, pick one of the stages in customer order cycle and analyze the following:Information GeneratedInformation Required from other
stages (or other functions)Typical Problems due to untimely
information
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The Whole Process
Quotation
Contact
Schedulingagreement
Order
Delivery Goods issue
Shipment
Invoice
Accounts ReceivableMaterial Stock
Account
Inquiry
Contract
Pre-SalesPre-Sales
Sales OrderProcessingSales OrderProcessing
Delivery/TransportationDelivery/Transportation Transfer Order
BillingBilling
Payment/AccountingPayment/Accounting
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Inventory SourcingInventory Sourcing
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Exercise
SAP Exercise on Sales Order Processing in Project 2.
Points to NoteHow documents are linked to one
anotherHow data entry is made from Master
Databases
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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
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Availability Control
Three options proposed by SAP R/3
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Document Flow
Accounting Document 90000002 is linked to sales order 5
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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
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Questions!!!
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