Presentation on theme: "Chapter 6 Transactions and Enterprise Resource Planning Jerry Post"— Presentation transcript:
1 Chapter 6 Transactions and Enterprise Resource Planning Jerry Post Introduction to MISChapter 6Transactions and Enterprise Resource PlanningJerry PostTechnology Toolbox: Selecting an ERP SystemTechnology Toolbox: Designing an EISCases: Auto Industry
2 OutlineHow do you process the data from transactions and integrate the operations of the organization?How do you efficiently collect transaction data?What are the major elements and risks of a transaction?Why are transactions more difficult in an international environment?How do you track and compare the financial information of a firm?What are the transaction elements in the human resources management system?Can a company become more efficient and productive?How do businesses combine data from operations?How do you combine data across functional areas, including production, purchasing, marketing, and accounting?How do you make production more efficient?How do you keep track of all customer interactions? Who are your best customers?How can a manager handle all of the data in an ERP system?How does the CEO know that financial records are correct?
3 Transactions and Integration AdditionalStoresCEO InformationStrategyBankTacticsWarehouseInventoryManagementSupplierOperationsEDIPOSSales ReportsCashRegistersCustomersProcess ControlCentral Computer
4 Data Capture Banking and Finance Sales Workers Process Control Collecting transaction data at the point of sale ensures accurate data, speeds transactions, and provides up-to-the-minute data to managers.
5 Radio Frequency Identification (RFID) RFID tagSimple security tagRadio/microwavesCapacitor: collected energyCBEantennaTransistors: dataRFID readerData:Alter the wavesScanner from:
6 QR Codes Two-dimensional code. Can hold thousands of characters or digits.Can be read by cell phone cameras.Initially used for packages.Now, often used for marketing, even billboards, museum and art pieces, and bus schedules.One of several Web sites to create free QR codes.
7 Process Control Various Production machines: lathe, press, dryer, . .. Production data:QuantityQualityTimeMachine statusControl TerminalControl settingsand commands
8 Electronic Data Interchange The price of paper$30 to $40 for each purchase order$24 to $28 for suppliers to handleEDI$12 for orders0.32 for suppliersProprietary EDICommercial providers and standards
9 EDI: ProprietaryFirms must support multiple data formats and sometimes different computers for each contact.OrderDatabase& AccountsSupplierQueries &OrdersCustomer 1ProductionDatabase& AccountsInvoices &confirmationConvertConvertCustomer 2
10 EDI: Standards Bank/EDI consolidator Route Messages Convert to Customer 1OrderDatabase& AccountsMessagesto/fromany customerConvert toStandardConvert toStandardProductionDatabase& AccountsCustomer 2Supplier
11 Composite Data Element EDI StandardsUN EdifactUS ANSI X12Segments for each areaDetail data formatsMessageSegmentComposite Data ElementData ElementCode Lists
12 ANSI X12 Segments Partial List of segments Detailed specifications for each segmentData neededFormat104 - Air Shipment Information110 - Air Freight Details and Invoice125 - Multilevel Railcar Load Details126 - Vehicle Application Advice127 - Vehicle Buying Order128 - Dealer Information129 - Vehicle Carrier Rate Update130 - Student Educational Record (Transcript)131 - Student Educational Record (Transcript) Acknowledgment135 - Student Loan Application139 - Student Loan Guarantee Result140 - Product Registration141 - Product Service Claim Response142 - Product Service Claim143 - Product Service Notification144 - Student Loan Transfer and Status Verification146 - Request for Student Educational Record (Transcript)147 - Response to Request for Student Ed. Record (Transcript)148 - Report of Injury or Illness
13 EDI On The Internet Advantages Low cost. Anyone can connect. Worldwide reach.Many tools and standards.The InternetEdifact Message
14 Extensible Markup Language (XML) <?xml version="1.0"?><!DOCTYPE OrderList SYSTEM "orderlist.dtd"><OrderList><Order><OrderID>1</OrderID><OrderDate>3/6/2004</OrderDate><ShippingCost>$33.54</ShippingCost><Comment>Need immediately.</Comment><Items><ItemID>30</ItemID><Description>Flea Collar-Dog-Medium</Description><Quantity>208</Quantity><Cost>$4.42</Cost><ItemID>27</ItemID><Description>Aquarium Filter & Pump</Description><Quantity>8</Quantity><Cost>$24.65</Cost></Items></Order></OrderList>ExampleData is sent in a standard format that is easy for computers to parse and read.
15 XML: eXtensible Markup Language Used as a standard means to transfer data to machines with unknown capabilities.Most hardware and software can read and understand the data.The tags describe the content.Usually a separate schema file is used to describe the tags and the document structure.
17 XBRL Sample tag: Revenue <ix:nonFractioncontextRef="y2012“format="ixt:numcommadot" name="ifrs:Revenue"unitRef="EUR" decimals="0" scale="0"id="XWAND ">6,863,545</ix:nonFraction>AttributesDataThe Securities and Exchange Commission is requiring XBRL filings as of June The goal is to standardize reporting data and make it accessible to automated systems.
18 Transaction Objects Example Attributes Example Methods Date & time PriceQuantityItem NumberBuyerSellerExample MethodsStorePrintVerifyTransactionsItemsDate & TimeValueItemBuyerSellerItem_IdDescriptionLocation. . .BuyersBuyer_IdAddressPhoneSellersSeller_IdAddressPhone
19 Transaction Risks Vendor Government Customer payment Credit card company accepts risks for a fee.Vendor1. Receive payment.2. Legitimate payment.3. Customer not repudiate sale.4. Government not invalidate sale.paymentproducts or servicesGovernment1. Transaction record.2. Tax records.3. Identify fraud.4. Track money for other cases (drugs).Customer1. Receive product.2. Charged only as agreed.3. Seller not repudiate sale.4. Legal transaction.
20 Security and Trust Security Trust Each transmission is encrypted. Prevent interception.Keys generated by certificate authority (e.g., Verisign).Security on individual servers is the responsibility of vendor.There have been some thefts of data (e.g., credit-card numbers.)Vendor is motivated to secure the server.Commercial software exists to provide secure sites.TrustIs the vendor legitimate?Consider: Internet gambling.What if offshore vendor refuses to pay off a bet?As long as Internet gambling is illegal (in the U.S.) consumer has no recourse.Otherwise, use credit cards and rely on banks.Secure certificates.Is the customer legitimate?Rely on credit card data.Some vendors will ship only to billing address.Certificate authority.
21 International Transaction Issues ShippingCurrenciesLanguagesCustoms and tariffsJurisdiction for disputesDifferent laws and systemsVerify seller and purchaserPayment methods
22 Accounting Financial data and reports What do things really cost? The accounting cycleInventoryChecks and balancesDouble-entrySeparation of dutiesAudit trails
24 Accounting Software General Ledger Accounts Receivable Sample chart of accountsAutomatic postingAutomatic entry of vendorsFiscal yearsKeep past data books openPost to prior yearsAllocate department expensesAccounts ReceivableAutomatic early discountsInterest on late paymentsMultiple shipping addressesSales taxAutomatic reminder noticesAutomatic monthly feesKeep monthly detailsAccounts payableCheck reconciliationAutomatic recurring entriesMonitor payment discountsSelect bills from screenPay by item, not just total billGeneral FeaturesPrinter supportUse of preprinted formsCustom reportsCustom queriesSecurity controlsTechnical support costs
25 The Role of Accounting Transaction Data Journal entries—double entry: money and categoriesGeneral ledger—summary data by categoriesInformation is defined by the chart of accountsPurchases, Sales, Loans, and InvestmentsInventory ControlProcess and ControlsDouble-Entry SystemsSeparation of DutiesAudit TrailsException reports
26 Human Resources Management CompileMeritEvaluations& SalaryChangesManagersManagement ReportsMeritProduceManagementEmployeeReportsEvaluationsGovernmentProduceGovernmentReportsMerit &SalaryGovernmentReportsSalaryEmployeeSummariesEEO DataProcessPayrollBenefitsVacationEmployeeDataEmployee Data FilesScreenJobs &ApplicationsJob &ApplicantDataEmployeeDataApplicant DataSales Data &CommissionEmployeesJobApplicantsCustomers
27 Production Management SuppliersReceivingBill of MaterialsCrank UL6500Pedals LK3500Stem UL6600Saddle Selle…QualityPurchase OrdersProduction and AssemblyProductionInformationSystemQualityCustomersQualityShippingCustomer Order
28 Production Management Issues factoriesMultiple factories produce many items that need to be distributed to multiple stores.Ask Gitano Jeans in the 1980sHow do you schedule efficient production?How do you ensure the right products go to the right locations?Customers or stores
29 Distribution Center Factories Split the mass production shipments into smaller units and distribute to stores immediately—without holding inventory.Customer or storesNeed to match orders exactly, and carefully schedule arrival time of shipments.
33 Executive Information Integration in 2000sManagementSalesTerminalsqueryExecutive InformationSystemPersonal ComputerOr PDAOr BrowserDBMSsalesdataSalesTerminalsdataSuppliersProduction/ServiceEnterprise Resource PlanningBanks
34 ERP Integration Headquarters (England) Subsidiary (Spain) Database Use inventory item.Deduct quantity.Update inventory value.Check for reorder point.Order new item through EDI.Update Accounts payable.DatabaseFinancial dataGeneral ledgerPayroll…ManufacturingProduct detailsInventory…Weekly financial status.Cash flow.Budget versus actual cost.Project cost report.Daily production report.
35 ERP Primary Functions Accounting Finance Human Resources Management All transaction data and all financial statements in any currencyFinancePortfolio management and financial projectionsHuman Resources ManagementEmployee tracking from application to releaseProduction ManagementProduct design and manufacturing lifecycleLogistics/Supply Chain ManagementPurchasing, quality control, trackingCustomer Relationship ManagementContacts, orders, shipments
36 Enterprise Resource Planning Integrated systemsExamplesSAPPeopleSoftOracle FinancialsBasic features includedAccountingPurchasingHRMInvestment managementInternational environmentMultiple currenciesMultiple languagesProcedures and practicesFollows local (national) rulesFollows consolidation rulesExampleU.S. firm with European subsidiaries.Data is entered onceEuropean reports are generated for subsidiaries following local rulesResults are converted and consolidated to U.S. firm following international and U.S. rules
37 SAP Based in Germany, now worldwide Support for international transactions and multinational firmsRuns on multiple database and hardware platformsCan handle large and small companiesExpensive, but price is relative.FinancialsLogisticsHuman resource management
38 SAP Financials Financial Accounting Investment Management Controls General ledgerAccounts receivable/payableSpecial ledgersFixed assetsLegal consolidationInvestment ManagementInvestment planning/budgeting/controlDepreciation forecast/simulation/calculateControlsOverhead costActivity based costingProduct costProfitability analysisTreasuryCash managementTreasury managementMarket risk managementFunds managementEnterprise ControlExecutive information systemBusiness planning and budgetingProfit center accountingConsolidation
39 SAP Logistics Purchasing Materials management Manufacturing WarehousingQuality managementPlant maintenanceService managementSalesDistributionProduct data managementMaster data managementDesign and change processProduct structureDevelopment projectsSales and distributionSales activitiesSales order managementShipping and transportationBillingSales information system
40 SAP Logistics Production planning and control Project system Material requirements planningProduction control and capacity planningCostingOrder information systemShop floor information systemProject systemWork breakdown structuresNetwork planning techniques, milestonesCost, revenue, financial, schedule, and resource managementEarned value calculationProject information system
41 SAP Logistics Materials management Quality management PurchasingInventory managementWarehouse managementInvoice verificationInventory controllingPurchasing information systemQuality managementQuality planningQuality inspectionsQuality controlQuality notifications and certificatesQuality management information systemPlant maintenanceStructuring technical systemsMaintenance resource planningMaintenance planningSystem for technical and cost accounting dataMaintenance information system
42 SAP Logistics Service management Integration Customer installed base administrationService contract managementCall managementBillingService information systemIntegrationWhen the clerk enters a sale, bills are generated automatically (mail, fax, or EDI).Sales and revenue are instantly updated in financial and control modules.The sales information system and EIS provide various up-to- date views and reports.
44 SAP HRM Personnel development Other features Career and succession planningProfile comparisonsQualifications assessmentsAdditional training determinationTraining and event managementOther featuresSAP Business workflowInternet scenariosEmployee self-service
45 SAP Integration Financial general ledger holds all base totals. Sub-ledgers are defined for important accountsAccounts payableManufacturingUser-definedetc.All transactions automatically flow throughIncluding currency conversionsSpecial rules can be definedSimple exampleManufacturing uses an item from inventoryThe quantity on hand is updatedThe inventory value is automatically changedOn any sub-ledgersOn the general ledgerReports are generated in any currencyNew orders and payments can be generated through EFT.
50 The Role of XML Messages and data Buyer Supplier <xml> <order>…</order></xml>ERP: OracleERP: SAP
51 Customer Relationship Management Multiple Contact PointsThe goal is to provide a single, integrated view of all customer activity, available to all employees who interact with the customer.Feedback, Individual Needs, and Cross SellingHaving better information enables workers to provide better service, meet the individual needs of each customer.
55 ERP: Summarizing Data An ERP database can be gigantic. It would take time to evaluate every single transaction.Managers, particularly executives, need to begin with a summary of some basic conditions.The summary is usually graphical.Managers can then drill down and look at the detail.
56 Digital Dashboard Example ChartsGaugesIconsTickersExceptionsDrill-down links
57 Digital Dashboard Examples Active, Silverlight examples from Dundas
58 Executive IS: Drill-Down SalesProduction CostsDistribution CostsFixed CostsProduction CostsSouthNorthOverseasExecutivesData for EISCentral ManagementProduction: NorthItem#DataDataSalesDataProductionDistributionData
59 Audits and Sarbanes-Oxley FinancialStatementsCashInventorySalesInventorySome financial numbers are tied to the outside world.Validate these to anchor the statements.BankCustomer
60 Cloud Computing and ERP Several companies provide online servicesNetSuite.comLawson, Oracle, and SAP provide some hosting optionsMany othersFew companies use accounting systems in the cloud.Security, privacy, and reliability concernsCustomization is needed in both cases and it can be expensiveVariable costs can be expensive over timeBrowser-based approach is relatively new and mobile networking has been expensive and slowCRM is popular onlineLargely Salesforce.comBut if it is not integrated with the ERP it is largely contact management.
61 Technology Toolbox: Selecting an ERP System Planning StageGoals and OutputsInitiationEstimate costs, establish objectives, select teamInitial PlanningInitial vendor list and basic features (hardware platform, fees, internationalization, vendor size and stability, industry-specific support and so on.)Requirements GatheringIdentify business requirements. Detailed list of specifications, unit goals, and critical features. Evaluation criteria.Demos and SelectionProduct demonstrations, ratings, and site visits.ImplementationCustomize applications, convert data, restructure company operations, define new processes and train employees.
62 Quick Quiz: Selecting an ERP System 1. Assume you work for a mid-size construction firm that does about 30 percent of its work internationally. Find at least three ERP vendors and outline the features they provide.2. Assume you work for a large retail clothing firm with stores in most U.S. states. Identify the specific accounting and financial features you would want in an ERP system.3. Assume you work for a regional manufacturer that makes parts for cars. Explain how you would select and evaluate an ERP system. Find an example of a system that would work.
64 Quick Quiz: Designing an EIS 1. Assume you have been hired to help a regional law firm. What key elements might go on the main EIS screen?2. Assume you have bee hired to help an airplane manufacturer, design the main EIS screen.3. To help design an EIS for a retail video store chain, briefly describe the screens and steps needed to identify stores that are performing below par and find possible causes of the problems.