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Business Functions & Business Processes in ERP
This document discusses the key functional areas of business - marketing and sales, supply chain management, accounting and finance, and human resources. It defines business processes as collections of activities that take inputs and create outputs of value to customers. The document differentiates business functions from processes. It explains that enterprise resource planning (ERP) software helps coordinate information across functional areas through a shared database. Each functional area is described in terms of its functions, needed data inputs, and produced outputs to demonstrate how integrated information systems allow effective sharing of data.
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Business Functions & Business Processes in ERP
- 1. An ERP Overview: BusinessFunctions & Business Processes Author: Tom Matys Date: July 20th, 2012 Course: Mgmt Info Systems
- 2. Agenda Name themain functional areas of operation used in business Differentiate a business process from a business function Identify the kinds of data that each main functional area produces Identify the kinds of data that each main functional area needs Define integrated information systems and explain why they are important
- 3. Introduction 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 Business process: Collection of activities that takes some input and creates an output that is of value to the customer 3
- 4. Functional Areas andBusiness Processes To understand ERP, you must understand • How a business works • Functional areas of operation • Business processes 4
- 5. Four Functional Areasof Operation 1. Marketing and Sales (M/S) 2. Supply Chain Management (SCM) 3. Accounting and Finance (A/F) 4. Human Resources (HR) Business functions: Activities specific to a functional area of operation 5
- 6. Functional Areas ofOperation
- 7. Functional Areas ofOperation • Functional areas are interdependent Each requires data from the others • Better integration of functional areas leads to improvements in communication, workflow, and success of company Information system (IS): Computers, people, procedures, and software that store, organize, and deliver information 7
- 8. Business Processes Collection ofactivities that takes one or more kinds of input and creates an output that is of value to customer • Customer can be traditional external customer or internal customer • Thinking in terms of business processes helps managers to look at their organization from the customer’s perspective 8
- 9.
- 10. Business Processes • Businessesmust always consider customer’s viewpoint in any transaction Successful customer interaction • Customer (either internal or external) is not required to interact with each business function involved in the process Successful business managers view business operations from the perspective of a satisfied customer 10
- 11. Business Processes Sharing dataeffectively and efficiently between and within functional areas leads to more efficient business processes Integrated information systems: Systems in which functional areas share data 11
- 12.
- 13. Business Processes • Businessestake inputs (resources) and transform these inputs into goods and services for customers Inputs: Material, people, equipment • Managing inputs and business processes effectively requires accurate and up-to-date information 13
- 14. Marketing and Sales Functionsof Marketing and Sales • Developing products • Determining pricing • Promoting products to customers • Taking customers’ orders • Helping create a sales forecast 14
- 15. Marketing and Sales •Need to keep track of customers • Product development • Good repeat customers allowed to charge purchases—up to a point • Records must show how much each customer owes and his or her available credit 15
- 16. Supply Chain Management Functionswithin Supply Chain Management • Making stuff (manufacturing/production) • Buying raw materials (purchasing) • Production planning requires sales forecasts from M/S functional area Sales forecasts: Analyses that attempt to predict the future sales of a product 16
- 17. Supply Chain Management •Production plans are used to develop requirements for raw materials and packaging • Raw materials: Bottled spring water, fresh lemons, artificial sweetener, raw sugar • Packaging: Cups, straws, napkins • SCM and M/S must choose a recipe for each product sold 17
- 18. Accounting and Finance Functionswithin Accounting and Finance • Recording raw data about transactions (including sales), raw material purchases, payroll, and receipt of cash from customers Raw data: Numbers collected from those operations, without any manipulation, calculation, or arrangement for presentation 18
- 19. Accounting and Finance Datafrom Accounting and Finance used by Marketing and Sales and Supply Chain Management 19
- 20. Human Resources Functions ofHuman Resources • Recruit, train, evaluate, and compensate employees • HR uses sales forecasts developed by the individual departments to plan personnel needs • Systems integrated using ERP software provide the data sharing necessary between functional areas 20
- 21. Functional Area InformationSystems • Potential inputs and outputs for each functional area described next • Note the kinds of data needed by each area and how people use the data • Information systems maintain relationships between all functional areas and processes 21
- 22. Marketing and Sales •Needs information from all other functional areas • Customers communicate orders to M/S in person or by telephone, e-mail, fax, the Web, etc. • M/S has a role in determining product prices • Pricing might be determined based on a product’s unit cost, plus some percentage markup • Requires information from Accounting and Finance, and Supply Chain Management data 22
- 23. Marketing and Sales(cont’d.) 23
- 24. Marketing and Sales M/Sneeds to interact with Human Resources to exchange information on hiring needs, legal requirements, etc. Inputs for M/S • Customer data • Order data • Sales trend data • Per-unit cost • Travel expense company policy 24
- 25. Marketing and Sales Outputs for M/S • Sales strategies • Product pricing • Employment needs 25
- 26. Supply Chain Management Needsinformation from various functional areas Production plans based on information about product sales (actual and projected) that comes from Marketing and Sales With accurate data about required production levels: Raw material and packaging can be ordered as needed Inventory levels can be kept low, saving money 26
- 27. Supply Chain Management SupplyChain Management data and records can: • Provide data needed by Accounting and Finance to determine how much of each resource was used • Support the M/S function by providing information about what has been produced and shipped • Supply Chain Management interacts in some ways with Human Resources 27
- 28.
- 29. Supply Chain Management Inputsfor SCM • Product sales data • Production plans • Inventory levels • Layoff and recall company policy 29
- 30. Supply Chain Management Outputsfor SCM • Raw material orders • Packaging orders • Resource expenditure data • Production and inventory reports • Hiring information 30
- 31. Accounting and Finance Needsinformation from all other functional areas A/F personnel: • Record company’s transactions in the books of account • Record accounts payable when raw materials are purchased and cash outflows when they pay for materials • Summarize transaction data to prepare reports about company’s financial position and profitability 31
- 32. Accounting and Finance • People in other functional areas provide data to A/F • M/S provides sales data • SCM provides production and inventory data • HR provides payroll and benefit expense data • M/S personnel require data from A/F to evaluate customer credit 32
- 33.
- 34. Accounting and Finance Inputsfor A/F • Payments from customers • Accounts receivable data • Accounts payable data • Sales data • Production and inventory data • Payroll and expense data 34
- 35. Accounting and Finance Outputsfor A/F • Payments to suppliers • Financial reports • Customer credit data 35
- 36. Human Resources HR needsinformation from the other departments • Tasks related to employee hiring, benefits, training, and government compliance are all responsibilities of HR • HR needs accurate forecasts of personnel needs from all functional units • HR needs to know what skills are needed to perform a particular job and how much the company can afford to pay employees 36
- 37.
- 38. Human Resources Observing governmentalregulations in recruiting, training, compensating, promotin g, and terminating employees Inputs for HR • Personnel forecasts • Skills data 38
- 39. Human Resources Outputs forHR • Regulation compliance • Employee training and certification • Skills database • Employee evaluation and compensation 39
- 40. Human Resources Significant amountof data is maintained by and shared among the functional areas • Timeliness and accuracy of these data critical to each area’s success and to company’s ability to make a profit and generate future growth • ERP software allows all functional areas to share a common database • Allows accurate, real-time information to be available 40
- 41. Summary • Basic functionalareas: Marketing and Sales, Supply Chain Management, Accounting and Finance, and Human Resources • Marketing and Sales: Sets product prices, promotes products through advertising and marketing, takes customer orders, supports customers, and creates sales forecasts • Supply Chain Management: Develops production plans, orders raw materials from suppliers, receives raw material, manufactures products, maintains facilities, and ships products to customers 41
- 42. Summary (cont’d.) • Accountingand Finance: Financial accounting to provide summaries of operational data in managerial reports, controlling accounts, planning and budgeting, and cash-flow management • Human Resources: Recruits, hires, trains, and compensates employees, ensures compliance with government regulations, and oversees the evaluation of employees • Information systems capture, process, and store data to provide information needed for decision making 42
- 43. Summary • Employees workingin one functional area need data from employees in other functional areas • Functional area information systems should be integrated, so shared data are accurate and timely • Managers think in terms of business processes that integrate the functional areas • Need to share information between functions and functional areas • ERP software provides this capability by means of a single common database 43
- 44.