Concepts in Enterprise

Resource Planning
Fourth Edition

Chapter One
Business Functions and Business
Processes
 Objectives
After completing this chapter, you will be able to:
• Identify the kinds of data each main functional area
needs
• Define integrated information systems, and explain why
they are essential in today’s globally competitive
business environment

Concepts in Enterprise Resource Planning, Fourth Edition 2

 Functional Area Information Systems

• 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

Concepts in Enterprise Resource Planning, Fourth Edition 3

 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

Concepts in Enterprise Resource Planning, Fourth Edition 4

 Marketing and Sales (cont’d.)

Figure 1-4 The Marketing and Sales functional area exchanges data with
customers and with the Human Resources, Accounting and Finance, and
Supply Chain Management functional areas
Concepts in Enterprise Resource Planning, Fourth Edition 5
 Marketing and Sales (cont’d.)

• M/S needs 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
– Company travel expense policy

Concepts in Enterprise Resource Planning, Fourth Edition 6

 Marketing and Sales (cont’d.)

• Outputs for M/S

– Sales strategies
– Product pricing
– Employment needs

Concepts in Enterprise Resource Planning, Fourth Edition 7

 Supply Chain Management

• Needs information 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

Concepts in Enterprise Resource Planning, Fourth Edition 8

 Supply Chain Management (cont’d.)

• Supply Chain 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

Concepts in Enterprise Resource Planning, Fourth Edition 9

 Supply Chain Management (cont’d.)

Figure 1-5 The Supply Chain Management functional area exchanges data
with suppliers and with the Human Resources, Marketing and Sales, and
Accounting and Finance functional areas

Concepts in Enterprise Resource Planning, Fourth Edition 10

 Supply Chain Management (cont’d.)

• Inputs for SCM

– Product sales data
– Production plans
– Inventory levels
– Layoff and recall company policy

Concepts in Enterprise Resource Planning, Fourth Edition 11

 Supply Chain Management (cont’d.)

• Outputs for SCM

– Raw material orders
– Packaging orders
– Resource expenditure data
– Production and inventory reports
– Hiring information

Concepts in Enterprise Resource Planning, Fourth Edition 12

 Accounting and Finance

• Needs information 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

Concepts in Enterprise Resource Planning, Fourth Edition 13

 Accounting and Finance (cont’d.)

• 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

Concepts in Enterprise Resource Planning, Fourth Edition 14

 Accounting and Finance (cont’d.)

Figure 1-6 The Accounting and Finance functional area exchanges data with
customers and with the Human Resources, Marketing and Sales, and Supply
Chain Management functional areas

Concepts in Enterprise Resource Planning, Fourth Edition 15

 Accounting and Finance (cont’d.)

• Inputs for A/F

– Payments from customers
– Accounts receivable data
– Accounts payable data
– Sales data
– Production and inventory data
– Payroll and expense data

Concepts in Enterprise Resource Planning, Fourth Edition 16

 Accounting and Finance (cont’d.)

• Outputs for A/F

– Payments to suppliers
– Financial reports
– Customer credit data

Concepts in Enterprise Resource Planning, Fourth Edition 17

 Human Resources

• HR needs information 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

Concepts in Enterprise Resource Planning, Fourth Edition 18

 Human Resources (cont’d.)

Figure 1-7 The Human Resources functional area exchanges data with the
Accounting and Finance, Marketing and Sales, and Supply Chain
Management functional areas

Concepts in Enterprise Resource Planning, Fourth Edition 19

 Human Resources (cont’d.)

• Observing governmental regulations in recruiting,

training, compensating, promoting, and terminating
employees
• Inputs for HR
– Personnel forecasts
– Skills data

Concepts in Enterprise Resource Planning, Fourth Edition 20

 Human Resources (cont’d.)

• Outputs for HR
– Regulation compliance
– Employee training and certification
– Skills database
– Employee evaluation and compensation

Concepts in Enterprise Resource Planning, Fourth Edition 21

 Human Resources (cont’d.)

• Significant amount of 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

Concepts in Enterprise Resource Planning, Fourth Edition 22

 Summary
• Basic functional areas: 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
Concepts in Enterprise Resource Planning, Fourth Edition 23
 Summary (cont’d.)

• Accounting and 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
Concepts in Enterprise Resource Planning, Fourth Edition 24
 Summary (cont’d.)

• Employees working in 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

Concepts in Enterprise Resource Planning, Fourth Edition 25

 Quick Quiz 2 (Q1)

____ are estimates of future product demand, which

is the amount of a product customers will want to buy.

Concepts in Enterprise Resource Planning, Fourth Edition 26

 Quick Quiz 2 (Q1)

Staff forecasts are estimates of future product

demand, which is the amount of a product customers
will want to buy.

Concepts in Enterprise Resource Planning, Fourth Edition 27

 Quick Quiz 2 (Q2)

____ are simply numbers collected from sales,

manufacturing, and other operations— without any
manipulation, calculation, or arrangement for
presentation.

Concepts in Enterprise Resource Planning, Fourth Edition 28

 Quick Quiz 2 (Q2)

Raw data are simply numbers collected from sales,

manufacturing, and other operations— without any
manipulation, calculation, or arrangement for
presentation.

Concepts in Enterprise Resource Planning, Fourth Edition 29

 Quick Quiz 2 (Q3)

If data are inaccurate or not current, manufacturing

may run out of raw material or packaging; such a
shortfall is called a(n) ____.

Concepts in Enterprise Resource Planning, Fourth Edition 30

 Quick Quiz 2 (Q3)

If data are inaccurate or not current, manufacturing

may run out of raw material or packaging; such a
shortfall is called a(n) stockout.

Concepts in Enterprise Resource Planning, Fourth Edition 31

 Quick Quiz 2 (Q4)

(True or False) Safety stock can result in an

overinvestment in inventory.

Concepts in Enterprise Resource Planning, Fourth Edition 32

 Quick Quiz 2 (Q4)

(True or False) Safety stock can result in an

overinvestment in inventory.

Concepts in Enterprise Resource Planning, Fourth Edition 33

 Discussion Question

• Discuss the advantages and disadvantages of an

ERP system.

Concepts in Enterprise Resource Planning, Fourth Edition 34