Electronic Business Final
Material Planning: Strategy group
High-level strategy used in production Make to Stock (MTS) Make to Order (MTO) Assemble to order (ATO)
Material Planning: MRP Type
Identifies which production planning technique to use Consumption-based planning Material requirements planning (MRP) Master production scheduling (MPS)
Material Planning: Procurement Type
In house or internally (production process) Externally (procurement process) Both None GBI: Finished goods: both Raw materials: externally Semifinished goods: internally
Management Accounting (Controlling (CO))
Internally focused, providing the information needed to effectively manage the company's various business processes. CO reports focus on the costs and revenues that management uses to achieve the business objectives of: -minimizing costs -increasing revenues -achieving profitability.
Why is the material master one of the most complex types of data in an ERP system? Provide some examples of data in a material master.
It is used by many processes and each process uses the material differently. Each process, therefore, requires data about the material that may or may not be needed by other processes. To manage these data, the material master groups them into different categories or views, each of which is relevant to one or more processes. Some of the data that are provided in the material master are basic data, sales data, and financial accounting data.
Explain the key organizational levels relevant to the purchasing process.
Organizational levels relevant to the procurement process include client, company code, and plant. A client represents an enterprise that is comprised of many companies or subsidiaries, each of which is represented by a company code. A plant is the location where the materials are received.
Raw Materials
Raw materials are purchased from a vendor and used in the production process.
Master Data
Represent entities associated with various processes such as selling a product to a customer. Examples of master data are customers, vendors, and materials.
Semi-Finished Goods
Semi-finished goods are typically produced in-house from other materials and are used in the production of a finished good.
Material Planning: Scheduling times
Task is to estimate the time needed to procure the necessary materials Common estimates are: In-house production time Planned delivery time GR (goods receipt) processing time In-house production time is further divided into: Setup time Processing time Interoperation time
Explain how the steps in the fulfillment process impact the general ledger accounts.
The shipment, billing, and payment steps have an impact on the general ledger. When the order is shipped, the inventory value in the general ledger is reduced. When the billing step is completed, accounts receivable reconciliation and sales revenue accounts in the general ledger are updated. When a customer payment is also recorded, the relevant general ledger accounts are updated, and a corresponding FI document is created.
Relationship between organizational levels and master data in purchasing.
The various organizational levels use the master data as guidelines while negotiating and purchasing for the company.
Material Planning: Planning time fence
Used to prevent ERP systems from automatically changing procurement proposals during a specific period of time Changes can be made manually
Organizational Data
Used to represent the structure of an enterprise. Examples of organizational structure are: companies, subsidiaries, factories, warehouses, storage areas, and sales regions Examples of organizational data are: client, company code, and plant.
Item Category
identifies the type of material and influences how the material is to be used in the BOM EX: stock item, nonstock item, variable size item, text item, document item, class item, intra material
Work-in-process (WIP)
materials are issued for production, but finished goods are not completed and placed in inventory until a later point in time during this interim period they are called this
Confirmation
1. how much work was completed 2. where it was completed (work center) 3. who completed it
What are the different paths from a purchase requisition to a purchase order? What determines which path is selected?
A company may go from a purchase requisition to a purchase order by: -requesting and receiving quotations. -Using a stock transport order. The source of supply usually determines the ultimate path.
Accounts Payable Accounting
AP accounting is associated with the procurement process. Companies use AP accounting to record and manage money owed to vendors for the purchase of materials and services
Accounts Receivable Accounting
AR accounting is associated with the fulfillment process and is used to manage money owed by customers for goods and services they have purchased.
The key processes in financial accounting
Asset (Ass) General Ledger (GL) Bank Ledger (BL) Accounts Receivable (AR) Accounts Payable (AP)
Asset Accounting
Asset accounting is used to record data related to the purchase, use, and disposal of assets such as buildings, equipment, machinery, and automobiles.
Bank Ledger Accounting
Bank ledger accounting is concerned with recording data associated with bank transactions.
Finished Goods
Created by the production process from other materials, such as raw materials and semi-finished goods.
Three types of data in an enterprise system.
(MOT) Master data Organizational data Transaction data
Customer master Data
Customer master data include data the company needs to conduct business with customers and to execute transactions that are specifically related to the fulfillment process. These data include general data, accounting data, and sales area data.
Customer-material info record Data
Data in a customer-material info record relate to purchases of a specific product by a specific customer; for example, a customer's material number cross-referenced with company's material number.
Material Planning: Consumption Mode
Derives requirements based on historical consumption data Reorder point planning: Replenishment lead time Safety stock Forecast-based planning Time-phased planning Use of low-value materials
Material Master Data
Material master includes data that are relevant to the material being sold to the customer, including sales organization data and sales plant data.
Output conditions Data
Output conditions are the methods companies use to generate the various outputs of the fulfillment process, like quotations and invoices.
Which master data are relevant for material planning?
Product routings, bills of material, material masters, product groups.
Transaction Data
Reflect the consequences of executing process steps, or transactions. Examples of transaction data are: dates, quantities, prices, and payment and delivery terms. Transaction data are a combination of organizational data, master data, and situational data, that is, data that are specific to the task being executed, such as who, what, when, and where.
Company-Level Purchasing Organization
The company-level purchasing organization is a single purchasing organization that is responsible for multiple plants within one or more company codes.
What is the credit management master record? How is it related to the customer master record?
The credit management master record is an extension of the customer master record, and it
Enterprise-Level purchasing organization
The enterprise-level purchasing organization is the most centralized model; there is only one purchasing organization for the entire enterprise and for all plants within the enterprise.
General Ledger
The general ledger is used to record the financial impacts of business process steps. It contains much of the data needed for financial reporting
Main objective of Material Planning
balance demand for materials w/ supply of materials so right quantity is available
Component Assignment
technique that assigns components in a BOM either to a routing or to a specific operation w/in the routing
Order Completion perspectives
a logistics perspective ( technically complete) or an accounting perspective (closed)
Production Order
created in the authorize production step and represents an actual commitment to produce a specific quantity of materials by a certain date -typically created by converting a planned order
Production Steps
1) Request production 2) Authorize production 3) Order release 4) Goods issue 5) Actual production 6) Confirmations 7) Goods receipt 8) Completion of order
List and describe the steps in the material planning process.
1. Triggers: periodic requirement, external events 2. Sales and operations planning 3. Disaggregation 4. Demand management 5. Materials Requirement Planning
Basic questions addressed by material planning?
1. what materials are required 2. how many are required 3. when are they required
Pricing Conditions Data
Pricing conditions are master data that companies utilize to determine the prices of their products.
Credit management master record.
The credit management master record includes data relevant to managing credit for that customer.
Product Routing
operational steps necessary to produce a material. Specifies sequence, work center, time. AKA Task list list of operations that a company must perform to produce a material -specifies the sequence the operations must be carried out, the work center where they are to be performed, and the time needed to complete them -can also list additional resources, known as production resource tools
Planned Order
formal request for production that indicates 1) what materials are need 2) how many units are needed 3) when they are needed *does not become a commitment until someone acts on the request
stock/requirement list
identifies all of the activities in the system that can potentially impact the quantity of material in inventory
Bill of Material (BOM)
identifies the components that are necessary to produce a material -hierarchical depiction of materials needed to produce a finished good or semi-finished good
Task List
list of operations required to accomplish a task
Work Center
location where value-added work needed to produce a material is carried out -where specific operations are conducted EX: can also be a machine, entire production line, work area like an assembly area, or person or group of people [resource used to produce a material]
Goods Issue
materials or components are issued to the production order from storage
Production Capacity
measure of how many units of a material a plant can produce w/in a given time frame
Types or Levels of purchasing organizations
(PEC) Plant-Level Enterprise-Level Company-Level
Steps in the procurement process that have an impact on financial accounting? Explain these impacts.
(PIG) PAYMENT PROCESSING- affects the bank, vendor, A/P accounts INVOICE VERIFICATION- affects the GR/IR, AP, vendor accounts GOODS RECEIPT- affects the inventory and GR/IR accounts
What is a delivery document and its significance in purchasing?
A delivery document identifies the materials included in the delivery and the purchase order. Shipments include a delivery document that states the contents of the order.
Relationship between Quotations and sales orders
A quotation is a binding agreement to sell specific products to the customer under clearly defined delivery and pricing terms. A sales order is an internal document that contains information necessary to fill the customer order in a standardized form. Much of the data contained in the sales order is also found in the quotation. A sales order can be created with reference to one or more quotations. A single quotation can generate either one or multiple sales orders.
Material Planning: BOM selection method
A single material can have multiple BOMs The BOM selection method identifies the criteria the ERP system should use to select the BOM
Describe the client-server architectures. What are their advantages and disadvantages?
Client-server architecture uses three layers to provide functionality: the presentation layer, application layer, and data layer. It uses a Web browser or a graphical user interface (GUI) to communicate with the application layer. In desktop applications all three layers are contained in one system. The shift to three-tier client-server architecture dramatically: -reduced the costs of acquiring, implementing, and using an enterprise system -significantly increasing the scalability of these systems. The disadvantage is that this arrangement exposes business processes and data contained in an enterprise system.
Financial Accounting (FI)
Concerned with recording the financial impacts of business processes as they are executed. These data are then used to generate financial statements to meet legal or regulatory reporting requirements. These statements are directed toward external audiences such as regulatory bodies; for example, the SEC.
Relationship between Sales orders and deliveries
Creating a delivery document serves as an authorization for delivery. Schedule lines from multiple sales orders with similar characteristics can be combined into one shipment or delivery. This arrangement is possible only when the sales orders have the same ship-to address, shipping point, and due date. Conversely, items in one order can be split into multiple deliveries.
Material Planning: Availability check group
Defines the strategy the ERP system uses to determine whether a quantity of material will be available on a specific date Most commonly applied method is available-to-promise (ATP) Considers a broad range of elements (MRP elements) representing both supply and demand for the material Supply elements: current inventory, requisitions, purchase orders, planned orders, production orders, etc Demand elements: sales orders, safety stock, material reservations, etc Availability check is used by many processes
Discrete & Repetitive Manufacturing
Discrete manufacturing, the company produces different materials over time in batches, often alternating between materials on the same production line. Repetitive manufacturing, the same material is produced repeatedly over an extended period of time at a relatively constant rate. In discrete and repetitive manufacturing, each unit produced is distinct from other units, and the component materials from which the unit is made can be identified.
Explain the outcomes of a goods receipt step of the procurement process.
Goods receipt is the first step of the procurement process that has an impact on financials, specifically on the general ledger. The goods inventory account is debited by the value of goods received, and a corresponding credit is posted to the GR/IR account. A material document and an accounting document are also created. Finally, the purchase order history and material master are updated.
Production Process
Involves the various steps and activities necessary to manufacture or assemble finished goods and semi finished goods. Most common types of production processes are: discrete, repetitive, and process manufacturing. Organizations utilize different manufacturing strategies depending on the type of material being produced and the business model needed to sell those materials profitably.
Relationship between Deliveries and Transfer Requirements
Items from multiple delivery documents can be included in a single transfer requirement. This approach can optimize the work of the pickers in the warehouse by grouping requests for materials that are located in the same area. Alternatively, a delivery document can generate multiple transfer requirements. Data from the delivery documents are copied to the transfer requirement.
Production Resource Tools
MOVABLE resources that are shared among different work centers EX: calibration or measurement instruments, jigs and fixtures, documents like engineering drawings
Two most common production strategies
Make-to-stock: materials are produced and stored in inventory for sale at a later time. Make to-order: production occurs only after the company receives a sales order.
Explain the relationship between the master data and organizational data in the fulfillment process.
Master data in the fulfillment process are defined for specific organizational levels. One example, customer master data, are defined for specific company codes (financial data) and sales organizations (sales data). Another example is the material master, which is defined for a client (basic data), sales organization (sales strategies) , and sales plant data (how the material will be shipped).
Briefly discuss the master data relevant to the fulfillment process.
Master data in the fulfillment process include: (PMC, OCCC) Pricing conditions Material master Customer master Output conditions Customer-material info record Credit management master record.
What are material types?
Material types are categories of materials that are based on how the materials are used in the firm's operations. The four most common material types are: (RSFT) raw materials semi-finished good finished goods trading goods.
Relationship between Deliveries and Billing Documents
Multiple deliveries can be combined to create one billing document. This process can be employed only when the deliveries share the same characteristics with respect to payer, billing date, and country of destination. Conversely, one delivery can generate multiple invoices. This is the case when the terms of payment for the items in the delivery are different.
Explain parallel accounting. Why do organizations maintain multiple ledgers?
Parallel accounting is the process whereby enterprises implement multiple ledgers in parallel and use each ledger for different purposes. The enterprise defines ledgers for each company (company code) based on local accounting practices.
Material Planning: Lot size key
Procedure to determine the lot size of each procurement proposal generated by material planning Static procedures: fixed quantity based on: Fixed lot size = predetermined fixed quantity Lot-for-lot = exact quantity required Replenishment up to maximum stock level Period lot sizing procedures: combine requirements from multiple time periods Optimum lot sizing procedures: EOQ, EPQ GBI- all materials: lot-for-lot
Explain the various strategies for the procurement, fulfillment, and production processes.
Production strategies Make-to-stock Make-to-order Procurement strategy Procure-to-stock Procure-to-order Fulfillment strategy Sell-from-stock
Describe the service-oriented architectures. What are their advantages and disadvantages?
Service-oriented architecture allows: -multiple client server systems to communicate via new technologies called Web services. -enables companies to create new applications quickly and inexpensively. -them to build composite applications on top of their existing three-tier client-server applications without changing the underlying applications. The disadvantage is that this arrangement exposes business processes and data contained in an enterprise system.
Discuss the key master data relevant to warehouse management.
The key master data in warehouse management are material master and storage bins. a. Material master. If a company stores a material in a storage location that is associated with a warehouse, then it must include additional data in the master record for that material. These data are included in the warehouse management view of the material. Master data are typically defined for specific organizational levels. The organizational levels relevant to the warehouse management view of master data are warehouse, plant, and storage type. Three types of data are relevant to the warehouse management view: basic data, data used in defining stock placement and removal strategies, and data regarding the storage bins where the materials will be stored. b. Storage bins are the smallest unit of space in a warehouse. They are the areas where materials are physically stored. Storage bins can vary in size from small containers (for nuts and bolts) to large areas for bulky materials (pallets of soft drink cases). They can be containers on shelves or designated spaces on a warehouse floor where pallets of materials are stored. Storage bins have unique addresses that identify their location in a warehouse. These addresses are frequently based on a coordinate system. In a shelf storage environment, for example, a bin address can include a row (or an aisle) number, a stack number, and a shelf number.
Briefly discuss the organizational levels relevant to the fulfillment process. Be sure to explain the relationships among the various levels.
The organizational levels relevant to the fulfillment process are: (CCC,SSS,P) Client Company Code Credit Control Area Sales Area Shipping Point Storage Location Plant Sales area, shipping point, and credit control area are unique to fulfillment, whereas the other levels are relevant to other processes as well. The client level is the highest level in the organizational hierarchy; it usually includes the corporate headquarters. The company code is the second level. In most cases company codes represent legally independent entities. A sales area is a combination of three other organizational elements — sales organization, distribution channel, and division.
Plant-level purchasing organization
The plant-level purchasing organization, in which each plant has its own purchasing organization, is the most decentralized model.
Trading Goods
Trading goods are purchased from a vendor and resold to customers. The company does not perform any additional processing of trading goods prior to reselling them.
How are transaction data created in an ERP system?
Transaction data are a combination of organizational data, master data and situational data. A SAP ERP system records transaction data using several different types of documents, such as sales orders and purchase orders.
Explain the material and financial accounting impacts of goods movements in IM.
a. Goods receipt. Both material and financial accounting documents might have to be created. b. Goods issue. Appropriate material, FI, and CO documents are created. c. Stock transfer. Both material and financial accounting documents might need to be created. d. Transfer posting. Material document is created. However, whether there is a financial accounting impact depends on the organizational levels involved in the goods movement. Storage location-to-storage location transfer. Because materials are typically valued at the plant level rather than the storage location level, a transfer between storage locations in the same plant does not affect valuation. Therefore, no FI document is created. This observation applies only if all quantities of the same materials are valued in the same way. When materials are valued differently, the transfer has a financial accounting impact, and an FI document is created. Plant-to-plant transfer. Because materials are valued at the plant level, a plant-to-plant transfer represents a change in the value of the materials. Consequently, there is an FI impact, and an FI document is created. Company code-to-company code transfer. In this scenario, two FI documents are created - one for each company code.
Define the four types of goods movements in IM, and provide an example of each type.
a. Goods receipt. Goods receipt is a movement of materials into inventory; it results in an increase in inventory. Typically raw materials and trading goods are received from a vendor as part of the procurement process, and finished goods are received from the shop floor after the production process has manufactured them. b. Goods issue. Goods issue is a movement of materials out of inventory; it therefore results in a decrease in inventory. In the fulfillment process, a goods issue indicates a shipment of finished goods or trading goods to a customer against a sales order. In the production process, a goods issue reflects the issuing of raw materials or semifinished goods to a production order. c. Stock transfer. Stock transfers are used to move materials from one organization level or location to another within the same enterprise in a simple way. Material can be moved between storage locations within one plant, between plants in one company code, or between plants in different company codes. d. Transfer posting. Transfer postings are a straightforward way to change the status or type of stock, such as unrestricted use, in quality inspection, blocked, or in transit. Transfer postings do not necessarily involve the physical movement of goods (e.g., changing the material number of a material), but they always result in a change to the status or type of goods.
Analyze the differences between one-step and two-step stock transfers.
a. Number of steps. The one-step procedure executes both tasks — issue and receipt — as a single step. In the two-step procedure they are completed in separate steps. b. Number of material documents created. In a one-step stock transfer only one material document is created. In a two-step stock transfer two material documents are created. c. Value of the material. The value of the material at the receiving plant is the same as that of the supplying plant in the case of one-step stock transfer, but it might not be the same in a two-step transfer. d. Stock status. In a one-step transfer, the stock of the issuing plant is reduced, and the stock of receiving plant increases. In the two-step transfer, the materials are placed in the "in-transit" stock status at the receiving location because they do not arrive immediately at the destination location. Later, when they are physically received at the destination location, a second step (receipt) changes their status from in-transit to unrestricted use (or another status). e. Usage. When the two locations are physically close to each other and there is no significant time lag between issue and receipt, the one-step procedure is more appropriate to use. In contrast, if locations are not physically close to each other and the time lag between issue and receipt is significant, the two-step procedure is more appropriate. The two-step movement also might be required if the same individual does not have authorization to make changes at both locations.
Identify and discuss the key organizational levels relevant to inventory management and warehouse management.
a. Storage location. The key organizational level associated with inventory management. Storage locations are associated with plants, which in turn are associated with company codes. b. Warehouse. The key organizational level in warehouse management. A warehouse is associated with one or more combinations of plant and storage location. The association between storage locations and a warehouse provides the linkage between IM processes and WM processes. When linking warehouses to storage locations, the following rules apply: - A warehouse must be linked to at least one storage location. - A warehouse can be linked to storage locations across multiple plants. - A storage location can be linked to only one warehouse. - Not all storage locations must be linked to a warehouse.
Backflushing
technique that automatically records the goods issue when the order is confirmed; materials issued are NOT recorded at the time they are withdrawn from inventory -time lag between actual issue of the materials and recording of the issue in the ERP system -eliminates a step and can make the production process more efficient
