Session 2

Business Process and

Business Functions

Agenda

Introduction
Name the main functional areas of operation used in
business
Differentiate between a business process and a
business function
Identify the kinds of data each main functional area
produces
Identify the kinds of data each main functional area
needs
Define integrated information systems, and explain why
they are essential in todays globally competitive
business environment
Conclusion
2

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

Functional Areas and

Business Processes

To understand ERP, you must

understand how a business works

Functional areas of operation

Business processes

Functional Areas of
Operation

Marketing and Sales (M/S)

Supply Chain Management (SCM)
Accounting and Finance (A/F)
Human Resources (HR)
Business functions: Activities
specific to a functional area of
operation
5

Functional Areas of Operation

(contd.)

Figure 1-1 Examples of functional areas of operation and their business functions
6

Functional Areas of
Operation (contd.)

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

Business Processes

Collection of activities 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 customers perspective

Business Processes
(contd.)

Figure 1-2 Sample business processes related to the sale of a

personal smartphone
9

Business Processes
(contd.)

Businesses must always consider

customers 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

Business Processes
(contd.)

Sharing data effectively and

efficiently between and within
functional areas leads to more
efficient business processes
Integrated information
systems: Systems in which
functional areas share data
11

Business Processes
(contd.)

Figure 1-3 A process view of business

12

Business Processes
(contd.)

Businesses take 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

Functional Areas and Business

Processes of a Very Small
Business

Example: A fictitious coffee shop

Examine business processes of the

coffee shop
See why coordination of functional
areas helps achieve efficient and
effective business processes
Look at how integration of the
information system improves the
business
14

Marketing and Sales

Functions of Marketing and Sales

Developing products
Determining pricing
Promoting products to customers
Taking customers orders
Helping create a sales forecast

15

Marketing and Sales

(contd.)

Marketing and Sales tasks for the coffee

shop

Formal recordkeeping not required

Need to keep track of customers
Product development can be done informally
Good repeat customers allowed to charge
purchasesup to a point

Records must show how much each customer

owes and his or her available credit

16

Supply Chain Management

Functions within Supply Chain

Management

Making the coffee

(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
17

Supply Chain Management

(contd.)

Production plans 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 coffee product sold
18

Accounting and Finance

Functions within 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

sales, manufacturing and other
operations, without any manipulation,
calculation, or arrangement for
presentation
19

Accounting and Finance (contd.)

Data from Accounting and Finance used

by Marketing and Sales and Supply Chain
Management

Sales records are important component of

sales forecast
Sales forecast is used in making staffing
decisions and in production planning
Records from accounts receivable used to
monitor the overall credit-granting policy of
the coffee shop
20

Human Resources

Functions of Human 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
21

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
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 products
unit cost, plus some percentage markup
Requires information from Accounting and
Finance, and Supply Chain Management data

23

Marketing and Sales

(contd.)

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
24

Marketing and Sales

(contd.)

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
25

Marketing and Sales

(contd.)

Outputs for M/S

Sales strategies
Product pricing
Employment needs

26

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

27

Supply Chain Management

(contd.)

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
28

Supply Chain Management

(contd.)

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
29

Supply Chain Management

(contd.)

Inputs for SCM

Product sales data

Production plans
Inventory levels
Layoff and recall company policy

30

Supply Chain Management

(contd.)

Outputs for SCM

Raw material orders

Packaging orders
Resource expenditure data
Production and inventory reports
Hiring information

31

Accounting and Finance

Needs information from all other functional areas

A/F personnel:

Record companys 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
companys financial position and profitability

32

Accounting and Finance (contd.)

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
33

Accounting and Finance (contd.)

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
34

Accounting and Finance (contd.)

Inputs for A/F

Payments from customers

Accounts receivable data
Accounts payable data
Sales data
Production and inventory data
Payroll and expense data
35

Accounting and Finance (contd.)

Outputs for A/F

Payments to suppliers
Financial reports
Customer credit data

36

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

37

Human Resources (contd.)

Figure 1-7 The Human Resources functional area exchanges data with the
Accounting and Finance, Marketing and Sales, and Supply Chain Management
functional areas
38

Human Resources (contd.)

Observing governmental
regulations in recruiting, training,
compensating, promoting, and
terminating employees
Inputs for HR

Personnel forecasts
Skills data
39

Human Resources (contd.)

Outputs for HR

Regulation compliance
Employee training and certification
Skills database
Employee evaluation and
compensation

40

Human Resources (contd.)

Significant amount of data is maintained by and

shared among the functional areas
Timeliness and accuracy of these data critical to each
areas success and to companys 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

41

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
42

Summary (contd.)

Supply Chain Management: Develops

production plans, orders raw materials from
suppliers, receives raw material, manufactures
products, maintains facilities, and ships
products to customers
Accounting and Finance: Financial accounting
to provide summaries of operational data in
managerial reports, controlling accounts,
planning and budgeting, and cash-flow
management
43

Summary (contd.)

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
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
44

Summary (contd.)

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