ISTANBUL KÜLTÜR UNIVERSITY Faculty Of Eng i neer i ng a nd Arch i tecture

1. Lecture Notes ISTANBUL KÜLTÜR UNIVERSITY Faculty Of Engineering and Architecture Industrial Engineering Department ENTERPRISE RESOURCE PLANNING

2. Contents • Section 1 : ERP - Business with ERP • Section 2 : Marketing and Sales • Section 3 : Production and Materials Management • Section 4 : Accounting and Finance • Section 5 :Introduction to SAP R/3 (the ERP software)

3. SECTION 1Enterprise Resource Planning- Business with ERP

4. Business in the Digital Age

5. The Business Application Architecture

6. Industrial Age Information Age Companies in e-Competition A New Business Model

7. Business with ERP • Businesses exist to make a profit • Businesses strive to provide goods and services faster and cheaper than competition • More efficient ways of accessing and sharing information will increase customer service and therefore profits

8. What is ERP offering? • ERP is business process infrastructure • ERP is a software mirror image of the major business processes of a firm, such as customer order fulfillment and manufacturing. • ERP software automates and integrates the basic processes of a firm, from finance to the shop floor, and eliminate complex, expensive links between computer systems that were never meant to talk to each other. • provide interorganizational &intraorganizational collaboration & information sharing

9. ERP Business Technology architecture • Business Process Workflow Management • Functional Information Management • Marketing, Operations, HRM, etc. • Decision Support Models and Tools • Data Management

10. ERP Functional Architecture • Information Systems Modules • Human Resources Management • Manufacturing Management • Financial Management • Accounting • Marketing Management • Workflow Management

11. Motivation for Implementing ERP Achieving and maintaining competitive advantage requires better information management: • Information Quality • Information Reliability • Information Access • Information Sharing

12. Firms View ERP As a System: • to provide better information management • to transform the competitive space • to transform relationships between • their customers • their suppliers • their competitors

13. Several factors led to development of ERP: • speed and power of hardware increased, cost and size decreased • client/server architecture • sophisticated software development • growth of business size, complexity, and competition • Manage company-wide business operations • Uses a common database and shared management reporting tools

14. Business Processes • Managers now think in terms of business process • Take the customer’s perspective

15. Logistics in business, the organized movement of materials and, sometimes, people. The term was first associated with the military but gradually spread to cover business activities.Separate activities or functions, all of which fall under a business firm's logistics “umbrella,” include customer service, demand forecasting, documentation flow, interplant movements, inventory management, order processing, packaging, parts and service support, plant and warehouse site selection, production scheduling, purchasing, returned products, salvage… Logistics in military science, all the activities of armed-force units in roles supporting combat units, including transport, supply, signal communication, medical aid, and the like. Components of Logistics It is useful to distinguish four basic elements or functions of logistics: supply, transportation, facilities, and services. (A fifth, management or administration, is common to all organized human activity.) All involve the provision of needed commodities or assistance to enable armed forces to live, move, communicate, and fight.

16. For this, company needs to • Make sure functional areas are integrated • Ensure information on customer configuration is up-to-date • Ensure manufacturing has configuration info. from sales • Ensure that, if financing is required, information from sales is available in accounting

17. Functional areas of operation • Marketing and Sales • Production and Materials Management • Accounting and Finance • Human Resources

18. Functional Area Information Systems • Potential inputs and outputs for each functional area • Different kinds of data and usage of data

19. Marketing and Sales • Determine pricing • Take customer orders • Create sales forecast • Do market research • Promote products and/or services

20. Production and Materials Management • Production Planning • Product Information • Need accurate forecasts from Marketing and Sales • Compare costs with Accounting

21. Accounting and Finance • Record transactions • Summarize data

22. Human Resources • Recruit • Train • Evaluate • Compensate • Retain

23. The Manufacturing Roots of ERP • Materials Requirements Planning (MRP) • Electronic Data Interchange (EDI) • MRP - II • Downsizing and reorganization drove the impetus for ERP

24. ERP and SAP’s R/3 • Software to allow all business areas to be integrated • Interactive and real-time processing • Users interact with computer screen, not printed data • Initially introduced R/2 • Open architecture • Access common database

27. ERP Significance • Global integration • Eliminates updating and repairing separate computer systems • Allows managers to manage, not just monitor

28. Cost of ERP • Large company • $50-500 Million • $30 million in software • $200 million in consulting • $ millions for hardware • Implementation: 4-6 years • Medium sized companies • $10-20 million • 2 year implementation

29. Questions about ERP • Is it for every company? • Is the software inflexible? • How much profit should you expect? • Why do some have more success?

30. SECTION2Marketing and Sales

31. Marketing Personnel make decision on: • What products should we produce? • How much of each product should we produce? • How are our products best promoted and advertised? • How should our products be distributed? • What price should we charge?

32. Warehouse Sales Order Pick, Pack and Ship Quote Sales Fitter Snacker’s Sales Process Receiving Returns Invoice Accounting Payment Fitter Snacker’s Sales Process

33. Problems with Fitter Snacker’s Sales process: • Sources: • Three unintegrated systems • Sales Order System • Warehouse System • Accounting System • Manual handling of transactions • Information not available in “real time”

34. Sales Order Processing Pre-Sales Activities Inventory Sourcing Payment Billing Delivery Sales and Distribution with ERP • SAP Sales and Distribution Process

35. Pre-Sales Activities • Inquiry or Quote (binding)(araştır & fiyat ver) • Marketing Activities • Tracking Contacts • Sales Calls • Visits • Mailings

36. Sales Order Processing • Activities required to record a sales order • Incorporate data from inquiry or quote • Automated Pricing and Discounting • Automate Credit Check

37. Inventory Sourcing • Check of inventory, orders and production to see if order can be delivered when customer desires • Includes shipping and considers weekends/holidays

38. Delivery • Releasing documents to warehouse to initiate pick, pack and ship • Sequenced and grouped for warehouse operation efficiency • Materials Management module carries out picking, packing and shipping

39. Billing • Sales order data copied to invoice • Can be printed and mailed, faxed or transmitted electronically • Accounting records updated

40. Payment • Payment may be physical check or electronic • Cash debited and customer account credited • Quick processing avoids credit check problems

41. Sales Order Entry in SAP R/3 Sold-to party P.O. Number Required Delivery Date Material Order Quantity

42. Master Data • Master data is stored in a central database that is accessed by all modules • Customer Master Data and Material Master Data are primary data sources for Sales Order Processing

43. Document Flow in SAP R/3 All documents related to original sales order

44. Document Flow • Sales order process creates numerous documents • Sales Order - Invoice - Delivery - Payment - Goods Issue - RMA • Document Flow links all documents related to a sales order

45. Customer Relationship Management (CRM) • ERP provides means to manage all data relating to a customer to improve the quality of the interaction • CRM Activities include: • One-to-One Marketing • Sales Force Automation • Sales Campaign Management • Marketing Encyclopedias • Call Center Automation

46. CRM Benefits • Lower Costs due to better use of sales and marketing resources • Higher Revenue by improving the effectiveness of marketing efforts • Improved strategy and performance measurement by changing management and staff focus CRM software builds on ERP data to improve marketing effectiveness

47. Production and Materials Management at Fitter Snacker • Must answer the following questions: • How much of each bar should be produced? • What quantities of raw materials should be ordered? • When should raw materials be ordered

48. General Approaches to Production • Make-to-stock: Items produced in anticipation of orders • Make-to-order: Items produced to meet specific customer orders • Assemble to order: Final product assembled from make-to-stock items

49. Mixer Snack Bar Line Mixer Form Bake Pack Raw Material Warehouse Finished Goods Warehouse Mixer Mixer Fitter Snacker Manufacturing Process

50. Fitter Snacker Production Problems • Communications • Marketing does not share data with production (sales promotions and large, unexpected orders) • Inventory • True inventory status not known • No real-time data on actual sales • Accounting and Purchasing • Difficulty forecasting raw material and labor costs • Adjusting accounts for actual vs. standard costs time consuming and done infrequently