ERP II - Exam I
Cash-to-cash cycle time
The time that elapses from when suppliers are paid for raw materials to cash is collected from the customer (used in supply chain management metrics).
Describe the steps in the production planning process of a manufacturer such as Fitter Snacker
Three important principles for production planning: Work from sales forecast and current inventory levels to create an "aggregate" ("combined") production plan for all products Break down aggregate plan into more specific production plans for individual products and smaller time intervals Use production plan to determine raw material requirements
Discuss sales and distribution in an ERP system (we looked at SAP and Microsoft Dynamics 365 FO.) Explain how integrated data sharing increases company-wide efficiency
"Because an ERP system uses a common database, it can minimize data entry errors and provide accurate information in real time to all users." "An ERP system can also track all transaction data (such as invoices, packing lists, RMA numbers, and payments) involved in the sales order process." Sharing of data from quotation with sales order Available to promise checks System can recommend an increase in planned production is a shortfall is expected Delivery process allows deliveries to be created so that the warehouse and shipping activities are carried out efficiently System creates an invoice by copying sales order data into the invoice document
Functional areas of operation
A broad categorization of business activities, including marketing, sales, production, and accounting.
Business function
A business activity within a functional area of operation.
Client-server architecture
A central computer-local computer arrangement in which data stored in a central computer (a server) are downloaded to a local PC (a client of the server) where data are processed. Historically, client-server architecture replaced many companies' mainframe-based architecture.
Scalability
A characteristic of an information system that indicates the system's capacity can be extended by adding servers to the network, rather than replacing the entire system. Scalability is a characteristic of client-server networks, but usually not of mainframe-based systems.
Customer relationship management (CRM) software
A collection of software tools that use data from a company's ERP system to enhance the company's relationships with its customers. CRM software allows for the following activities: segmenting customers, one-to-one marketing, sales-force automation (SFA), sales-campaign management, marketing encyclopedias, and call-center automation.
Rough-cut planning
A common term in manufacturing for aggregate planning.
Electronic data interchange (EDI)
A computer-to-computer transfer of standard business documents that allows companies to handle the purchasing process electronically, avoiding the cost and delays resulting from paper-based systems.
Accounting and Finance (A/F)
A functional area of business that is responsible for recording data about transactions, including sales, raw material purchases, payroll, and receipt of cash from customers.
Human Resources (HR)
A functional area of business that manages recruiting, training, evaluating, and compensating employees.
Human Resources (HR) module
A functional area of business that manages recruiting, training, evaluating, and compensating employees.
Supply Chain Management (SCM)
A functional area that includes developing production plans, ordering and receiving raw materials, manufacturing products, maintaining facilities, and shipping products.
Audit trail
A linked set of document numbers related to an order.
Repetitive manufacturing
A manufacturing environment in which production lines are switched from one product to another similar product.
Stockout
A manufacturing shortfall that occurs when raw materials or packaging run out.
On-time performance
A measure of how often a supplier meets agreed-upon delivery dates (used in supply-chain management metrics).
Quality Management (QM) module
A module ERP that helps companies plan and record quality-control activities, such as product inspections and material certifications.
Project System or Project Accounting module
A module in ERP that allows for the planning and control of new R&D, construction, and marketing projects. This module allows for costs to be collected against a project budget, and it can be used to manage the implementation of ERP itself.
Plant Maintenance (PM) module
A module in ERP that allows planning for preventive maintenance of plant machinery and managing maintenance resources, so equipment breakdowns are minimized.
Workflow (WF) module
A module in ERP that can be used to automate any of the activities in the ERP system. It can perform task-flow analysis and then prompt employees (by e-mail) if they need to take action.
Production Planning (PP) module
A module in ERP that maintains production information; production is planned and scheduled, and actual production activities are recorded.
Sales and Distribution (SD) or Trade and Logistics module
A module in ERP that records sales orders and scheduled
Asset Management (SAP) or Fixed Assets Module (Dyn 365)
A module in SAP and Dyn 365 and most integrated ERP systems that helps a company manage fixed-asset purchases (plant and machinery) and related depreciation
Materials Management or MRP module
A module in an ERP that manages the acquisition of raw materials from suppliers (purchasing) and the subsequent handling and storage of raw materials, work in process, and finished goods.
Material requirements planning (MRP)
A production-scheduling methodology that determines the timing and quantity of production and purchase-order releases to meet a master production schedule. This process uses the bill of material, lot-size data, and material lead times.
Tolerance group
A range that defines limits on the transactions that an employee can process.
Enterprise Resource Planning (ERP)
A system that helps a company manage business processes such as marketing, production, purchasing, and accounting in an integrated way. ERP does this by recording all transactions in a common database that is used by information systems throughout the company and by providing shared management-reporting tools.
Financial Accounting (Financial) module
Accounting processes that deal with documenting the transactions of a company that have an impact on the financial state of the organization. The documented transactions form the basis for financial statements for external parties and agencies.
Supply chain
All of the activities that occur between the growing or mining of raw materials and the appearance of finished products on the store shelf.
Condition technique
An ERP control mechanism that accommodates the various ways that companies offer price discounts.
Understand and explain the benefits (what does this do for the company) of a production planning process in an ERP system
An ERP system looks at the sales forecast, determines how many items need to be manufactured to meet the forecast and takes into account the amount of stock the company wants to have on hand. Then the system calculates the amount of raw materials needed to make the product and prepares purchase orders to purchase the raw materials needed. In an ERP system, companies can determine different ways to forecast their sales. For example a company could choose to use: historical sales data from the Sales and Distribution module (IE what has the company sold in prior years), have sales forecasted based on parameters set within the system Providing production data to accounting: Once FS accepts a shipment, Receiving must notify the ERP system of the arrival and acceptance of the material this is recorded using a Inventory Receiving Transaction (Goods receipt transaction) Receiving department must match receiving transaction with the purchase order that initiated it. Microsoft Dynamics 365 FO allows the receiving transaction and the purchase order to be electronically matched, avoiding time consuming manual matching When receipt is successfully matched and recorded, Microsoft Dynamics 365 FO immediately records the increase in inventory levels for the material ERP systems can play a key role in collaborative planning Produces performance measurements (metrics) - shows the effects of better supply chain management. Ex: cash-to-cash cycle time: time between paying for raw materials and collecting cash from customer. Able to measure total cost to produce and provide a product to the customer. Include cost of buying and handling inventory, processing orders, and information systems support.
Return on investment (ROI)
An assessment of a project's value calculated by dividing the value of the project's benefits by the project's cost.
Sales forecast
An estimate of future product demand, which is the amount of a product customers will want to buy.
Integrated information system
An information system that allows sharing of common data throughout an organization. ERP systems are integrated systems because all operational data are located in a central database, where they can be accessed by users throughout an organization
Legacy System
An older and often outdated information system.
Silo
An unintegrated information system configuration in which individual business functional areas each have their own hardware, software, and methods of processing data and information.
Differentiate between a business process and a business function
Business Processes are collections of activities that takes some input and creates an output that is of value to the customer. Creating the output might involve activities from different functional areas. Business Functions are activities specific to a functional area of operation.
Business process
Collection of activities that takes some input and creates an output that is of value to the customer Can relate to internal or internal customers Thinking in terms of business processes helps managers to look at their organization from the customer's perspective. Creating the output might involve activities from different functional areas.
Describe Fitter Snacker's production and materials management problems
Communication problems: FS's marketing and sales personnel do not share information with Production personnel Production personnel find it hard to deal with sudden increases in demand Might cause shortages or stockout Inventory problems Production manager lacks systematic method for: Meeting anticipated sales demand Adjusting production to reflect actual sales Accounting and purchasing problems Standards costs: normal costs of manufacturing a product Production and accounting must periodically compare standard costs with actual costs and then adjust the accounts for the inevitable differences
Describe the benefits of customer relationship management (CRM) software
Companies without a good connection between their workers and their customers run the risk of losing business Customer relationship management (CRM) software can help companies streamline their interactions with customers One-to-one marketing: making it possible to sell to a target market of 1 Sales force automation (SFA): Automating routing of customers to specific representatives (i.e. regional sales-people) Sales campaign management: Lets a company organize a marketing campaign and compile its results automatically Marketing encyclopedias: Database of promotional literature about products Call center automation: Integration with knowledge management system to find answers to customer questions Lower costs Higher revenue Improved strategy and performance measurement
Define integrated information systems, and explain why they are essential in today's globally competitive business environment
Computers, people, procedures, and software that store, organize, and deliver information. Functional areas, though often separated, are interdependent; Each requires data from the others. Better integration of functional areas leads to improvements in communication, workflow, and success of company. With enhanced information flow, communication between parts of the company improves, productivity increases, and costs decrease. Information systems capture, process, and store data to provide information needed for decision making.
Understand Enterprise Resource Planning (ERP) programs
Core software used by companies to coordinate information in every area of business Help manage companywide business processes Use common database and shared management reporting tools
Understand what lead schedules are and what they're used for, but not necessary to know calculations
Cumulative time required for the supplier to receive and process the order, take the material out of stock, package it, load it on a truck, and deliver it to the manufacturer
Identify the factors that led to the development of Enterprise Resource Planning (ERP) systems
Current ERP systems evolved as a result of: Advancement of hardware and software technology Development of a vision of integrated information systems Reengineering of companies to shift from a functional focus to a business process focus.
Raw data
Data on sales, manufacturing, and other operations that have not been analyzed or manipulated for presentation.
Describe how a typical ERP system (we looked at SAP and Microsoft Dynamics 365 FO) processes a standard sales order
ERP allows business processes to cut across functional area lines For most data entry fields, ERP system determines whether an entry is valid Customer master data is maintained in the central database and available to all ERP modules ERP system allows the user to define various ways to group customers and salespeople When a sales order is saved, ERP system assigns a document number to the sales order transaction ERP system keeps track of the document numbers for the sales order Employees can track the status of an order while it is in process or research it after shipping Document flow in ERP: linked set of document numbers related to an order When a company installs an ERP system, it can configure it for a number of pricing strategies As a safeguard, system can enforce limits on the size of discounts ERP systems integrate Accounting with all business processes When a sales order is recorded, related accounting data are updated automatically
Describe how a structured process for Supply Chain Management planning enhances efficiency and decision making
ERP system can improve the efficiency of production and purchasing processes. SAP and Microsoft Dynamics 365 FO are 2 examples of fully integrated ERP systems that efficiently automate a company's supply chain management processes. Efficiency begins with Marketing sharing a sales forecast. Production plan is created based on sales forecast and shared with Purchasing so raw materials can be ordered properly Companies can do production planning without an ERP system, but an ERP system increases company's efficiency ERP system that contains materials requirements planning allows Production to be linked to Purchasing and Accounting This data sharing increases a company's overall efficiency Companies are building on their ERP systems and integrated systems philosophy to practice supply chain management (SCM) SCM: company looks at itself as part of a larger process that includes customers and suppliers Using information more efficiently along the entire chain can result in significant cost savings Complexity of the global supply chain Developing a planning system that effectively coordinates information technology and people is a considerable challenge
Summarize ongoing developments in ERP (SAP and Dyn 365)
Experts anticipate that ERP's future focus will be on managing customer relationships, improving planning and decision making, and linking operations to the Internet and other applications through service-oriented architecture
Safety stock
Extra raw material and packaging kept available to help avoid stockouts.
Delivery
In ERP, release of the documents that a warehouse uses to pick, pack, and ship orders.
Organizational structure
In ERP, the method used to define the relationships between organizational groups such as companies, plants, storage locations, sales divisions, and distribution channels.
Modules
Individual programs that can be purchased, installed, and run separately, but that all extract data from the common database.
Explain why unintegrated Marketing and Sales information systems lead to company-wide inefficiency, higher costs, lost profits, and customer dissatisfaction (What are the problems that are resolved or improvements made with a fully integrated system)
Inefficiencies/Costs Information, such as a customer's credit limit, is not available in real time, detracting from decision-usefulness of data Discrepancies between systems occur, causing costly mistakes. Examples include inventory counts. Reconciliation of systems adds extra time and costs to reporting processes Damage to employee morale may occur if frustrations arise from disparate systems Customer satisfaction may suffer and firm may lose sales if orders are inaccurate, delayed, or unable to be fulfilled due to stockouts Resolutions offered by ERP & Integrated Systems Information that is integrated and cloud-based can be available in real time, contributing to overall decision usefulness Information is unified across systems, minimizing errors in data No reconciliation of systems necessary Employees are statistically happier when systems are simplified and integrated Integrated systems give companies opportunities to 'wow' customers with customized experiences and personalized service Customers can have greater confidence in the reliability of service
Describe how production planning data in an ERP system can be shared with suppliers to increase supply chain efficiency
Integrated information system allows purchasing to make the best decision on a vendor based on relevant, up-to-date information Once purchasing employee decides which vendor to use, the purchase order is transmitted to the vendor System can be configured to fax order to vendor, transmit it electronically through EDI (electronic data interchange), or send it over the Internet
Describe the unintegrated sales processes of the fictitious Fitter Snacker company (What are the problems with Fitter because of their unintegrated system)
Many of Fitter Snacker's sales orders have problems, such as: Incorrect pricing Excessive calls to the customer for information Delays in processing orders Missed delivery dates Reasons for problems: FS has separate information systems throughout the company for three functional areas: Sales order system Warehouse system Accounting system High number of transactions that are handled manually Information stored in the three systems is not available in real time Inefficiencies in the rest of the ordering process Determining the delivery date Checking customer's credit status Entering customer's order into the current order entry system Sometimes, order corrections are delayed and don't catch up to the invoicing process Results in late or inaccurate invoices
Identify the kinds of data each main functional area needs
Marketing & Sales Customer data Order data Sales trend data Per-unit cost Company travel expense policy Supply Chain Management Product sales data Production plans Inventory levels Layoff and recall company policy Accounting & Finance Payments from customers A/R data A/P data Sales data Production & inventory data Payroll & expense data Human Resources Personnel forecasts Skills data
Understand and be able to identify the core functional areas of each business and the role/processes that each functional area is responsible for
Marketing & Sales Marketing a product Taking sales orders Customer support CRM Sales forecasting Advertising Supply Chain Management Purchasing goods and raw materials Receiving goods and raw materials Transportation & logistics Scheduling production runs Manufacturing goods Plan maintenance Accounting and Finance Financial accounting of payments from customers and suppliers Cost allocation & control Planning & budgeting Cash flow management Human Resources Recruiting & hiring Training Payroll Benefits Government compliance
Identify the kinds of data each main functional area produces
Marketing & Sales Sales strategies Product pricing Employment needs Supply Chain Management Raw material orders Packaging orders Accounting & Finance Payments to suppliers Financial reports Customer credit data Human Resources Regulation compliance Employee training and certification Skills database Employee evaluation & compensation
Metrics
Measurements of performance; discussed in this book in relation to the effects of supply chain management efforts.
Customer master data
Permanent data about each of a company's customers; customer master data is stored in central database tables in ERP. Master data are used by many ERP modules.
Best practice
The best, most efficient way of handling a certain business process.
Discuss the pros and cons of implementing an ERP system and things to consider. What are the benefits of a fully integrated ERP system? What are the costs?
Pros: More efficient business processes that cost less than those in unintegrated systems. Allows management to manage operations, not just monitor them. Can dramatically reduce costs and improve operational efficiency. ERP eliminates redundant efforts and duplicated data; can generate savings in operations expense ERP system can help produce goods and services more quickly Company that doesn't implement an ERP system might be forced out of business by competitors that have an ERP system Smoothly running ERP system can save a company's personnel, suppliers, distributors, and customers much frustration Cost savings and increased revenues occur over many years (Difficult to put an exact dollar figure to the amount accrued from the original ERP investment) Cons: ERP implementations take time Other business factors may be affecting the company's costs and profitability Difficult to isolate the impact of the ERP system alone ERP systems provide real-time data Improve external customer communications ERP software is expensive to purchase and time-consuming to implement, and it requires significant employee training—but the payoffs can be spectacular. For some companies, ROI may not be immediate or even calculable Benefits of Full Integration Easier global integration. Integrates people and data while eliminating the need to update and repair many separate computer systems. Costs 63 percent of companies that performed the calculation reported a positive ROI for ERP Most companies felt that nonfinancial goals were the reason behind their ERP installations Size of the ERP software - Corresponds to the size of the company it serves Need for new hardware that is capable of running complex ERP software Consultants' and analysts' fees Time for implementation - Causes disruption of business Training - Costs both time and money
Material master data
Relatively permanent data about materials that are stored in central database tables in ERP
Describe the distinguishing modular characteristics of ERP software - What are typical modules in a functional area
Sales -Sales Order Processing, Accounts Receivable, CRM Purchasing -Purchase Order Processing, Inventory, Accounts Payable Finance - General Ledger, Fixed Assets etc
Understand and explain the terminology and steps in completing the production planning process in an ERP system
Sales forecasting - the process of predicting future demand for a company's products Sales and operations planning (SOP) - the process of determining what the company will produce. In the diagram, the Sales forecasting and starting inventory levels are inputs into this process. At first glance, it might seem that a company should just make products to match forecasted sales, but developing the production plan is often more complicated than that because capacity must be considered. Many products have seasonal demand, and to meet demand during peak periods, production planners must decide whether to build inventory levels before the peak demand, increase capacity during the peak period, subcontract production, or use some combination of these approaches. In the Demand Management step, the production plan is broken down into smaller time units, such as weekly/daily production figures to meet demand for individual products. The Materials Requirements Planning (MRP) process determines the amount and timing of raw material orders. This process answers the question: "What raw materials should we be ordering so we can meet a particular level of production?" And "When should we order these materials?" In the Purchasing step, the quantity and timing information from the MRP process is used to create raw materials purchase orders, which are transmitted to qualified suppliers. The Detailed scheduling process uses the production plans developed during the demand management step as an input for a production schedule. The detailed scheduling method used depends on the manufacturing environment. The Production process uses the detailed schedule to manage daily operations, answering the questions: "What should we be producing?" And "What staffing do we need to produce those products?"
Open architecture
Software that allows integration with third-party software. SAP ERP is an example of open-architecture software. The term can also be applied to hardware products.
Bill of material (BOM)
The "recipe" listing the materials (including quantities) needed to make a product.
Capacity
The amount of an item that can be produced.
Lead time
The cumulative time required for a supplier to receive and process an order, take the material out of stock, package it, load it on a truck, and deliver it to the manufacturer.
Standard costs
The expected cost of manufacturing a product during a particular period. Standard costs for a product are established by (1) studying the historical cost patterns (direct and indirect) in a company and (2) taking into account the effects of current manufacturing changes.
Vertical integration
The extent to which a company produces the components and assemblies used in the products it manufactures.
Marketing and Sales (M/S)
The functional area of business that is responsible for developing products, determining pricing, promoting products to customers, taking customers' orders, and creating sales forecasts
Document flow
The linked set of document numbers related to an order; an audit trail.
Information system (IS)
The people, procedures, software, and computers that store, organize, and deliver information.
Initial fill rate
The percentage of an order that the supplier provided in the first shipment.
Lot sizing
The process for determining purchase and production order quantities.
Master production schedule (MPS)
The production plan for finished goods.
MRP record
The standard way of showing the materials requirements planning (MRP) process on paper.
Data mining
The statistical and logical analysis of large sets of transaction data, looking for patterns that can aid decision making and improve customer sales and customer service. Data mining is often done with data in a data warehouse.
Database management system (DBMS)
The technology that stores database records in an organized fashion and allows for the easy retrieval of the data.
Initial order lead time
The time needed for the supplier to fill an order (used in supply- chain management metrics).
Name the main functional areas of operation used in business
· Marketing and Sales (M/S): develops products, sets prices, promotes, takes orders, supports customers, and creates sales forecasts. · Supply Chain Management (SCM): Develops production plans, orders raw materials, receives raw materials, manufactures, maintains facilities, and ships products. · Accounting and Finance (A/F): Provides summaries of operational data in managerial reports, controlling accounts, planning, and budgeting, and cash-flow management. · Human Resources (HR): Recruits, hires, trains, and compensates employees, ensures compliance with gov. regulations, and oversees the evaluation of employees.