1. Graduate Program in Business Information Systems
BIS 581 Business Process Management
Lectures 9-10
Aslı Sencer
Department of Management Information Systems

2. Business Process Management – 9-10 Integration with ERP Systems

3. Outline Types of Enterprises Systems Types of Data in ES SAP Overview
Procurement Process
Key Concepts and Assumptions
Conceptual Framework
Physical Flow
Document and Data Flow
Information Flow
Financial Impact
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4. Enterprise Systems Three stages of evolution
Stage 1: Stand-alone Mainframe Systems
Stage 2: Client-Server Architecture
Stage 3: Service-Oriented Architecture (SOA)
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5. The New Stack – Process Is the Next Platform
Client
Mainframe
Client Server
SOA
Application
Data Management
Composites
OS and Database OS DB
Custom
Punch Card or Terminal
(10’s of users)
PC or Internet
(1000’s of users)
Request Form
Any Device
(Millions of users)
Applications
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6. Stand Alone Mainframe Systems
Hardware
Expensive mainframe systems
Software
Specialized operating system software needed to execute the operations from the applications on the hardware
Custom applications for specific tasks like filling a customer order
Database
Early databases were too complex and difficult to manage.
Large companies could afford it.
Users used primitive terminals to interact with the database. They used punchcards instead of monitor or mouse.
In 1960’s to 1980’s IBM was the only company that could provide mainframes, operating systems and databases.

7. Drawbacks of Mainframe Systems
Scalability: # users or the volume of operations (transcations) that a given hardware and software can manage.
Ex: Your computer gets slower when a certain application is running. In this case you upgrade your computer by adding more memory and improved video processing card.
Mainframe ES’s are designed to handle maximum amount of users or operations since custom application, OS and database are entirely contained in a single piece of hardware and upgrade is extremely expensive.
Companies had to limit both capability and # users! Hence In mainframe environment, scalability is very low.

8. Drawbacks of Mainframe Systems
Custom designed to address the specific needs of the organization.
They could not easily be used by other companies.
Small and medium sized companies could not afford it.
In 1970’s packaged applications emerged.
Proprietary applications that are designed specifically for one firm vs.
packaged applications which are generic softwares that can be used by many companies.
SAP emerged in 1972 and generated significant cost savings, ES became widespread, initially in large companies.
Hardware is still costly! IBM mainframe hardware, operating system and database were still costly, thus ES were limited to large firms only.

9. Technological Advances During 1980’s 1990’s
Hardware and software became more and more efficient, capable and less costly!
More advanced operating systems like UNIX made it easier to manage complex hardware
Relational databases like INFORMIX made storing and accessing data much simpler
Advances in networking technologies like remote control ability allowed the companies to connect to the ES network remotely rather than physically installing it.
Emergence of 3-tier client server architecture led to the explosive growth in the use of ES

10. Client-Server Architecture
Desktop applications (like MS office) includes three components:
Presentation layer: How you interact with the application,
ex: menus, typing, selecting, etc.
Application layer: What the application allows you to do,
ex: create formulas, charts, compose an essay, etc.
Data layer: Where the application stores your work,
ex: harddrive, flash disk
In the early desktop applications all layers are contained in one system.
The 3-tier architecture seperates these into 3 seperate components.
The 2-tier architecture seperates presentation layer from the other two.
Much of the work done on internet uses a 2-tier or 3-tier architecture.
Your browser is the presentation layer
Web sites include application and data layers and provide capabilities like ing and information sharing. They may be 2 or 3-tier.
Ex: For instant messaging, you install a software to your PC-presentation layer - client component
The messaging system (stores login info, contacts, etc)-application layer - server component

11. 3-tier Client-Server Architecture
presentation
client
Tier 2: application
server
Tier 3: data
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12. Benefits of Client-Server Architecture
More practical:
Only install the presentation layer, i.e., client system to your PC to add a user.
Can access the application from any computer connected to the internet, since your login info is stored on the server-application layer.
Larger scalability and flexibility:
Different layers can run simultaneously on different computers.
ES can run on cheaper components rather than expensive mainframes
Ex: Sun Microsystems provide a variety of smaller server computers instead of an expensive mainframe.
Distribution of application workload across several smaller application servers leads to infinite scalability!
Each application server handles a set of simultaneous users. If more users are needed, company adds an additional application server.
However database has to be shared in a common database server!

13. Service Oriented Architecture (SOA)
In 2000’s companies began to web-enable their 3-tier applications so that users access the system through web browsers.
New technologies emerged to link and integrate many different client server systems more efficiently called Service Oriented Architecture (SOA).
By using web services, companies integrate several client – server systems and create an enterprise mashup or composite applications.
Web services send and receive data between ES’s.
The users have no idea which systems are used to present that output.
Ex: A company may see the map locations of its customers by creating a SOA between its ES that contains the customer data and Google Maps.
Ex: During e-purchasing a customer might select among the shipping companies. ES sends shipment info to several shipment companies, collect prices from each, delivers to the customer and assigns the order shipment to the selected one electronically.
SOA enables companies to build composite applications on top of their 3-tier client server applications without changing the existing applications.
Higher flexibility at an extremely low cost!

14. Types of Enterprise Systems
The ES Application Suite
Enterprise Resource Planning (ERP)
Supply Chain Management (SCM)
Supplier Relationship Management (SRM)
Product Lifecycle Management (PLM)
Other classifications
Best of breed vs. Niche applications
Software as a service (SaaS)
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15. ERP Systems
Evolved in 1990’s in parallel to advances in BPR and globalization.
ERP’s are the world’s largest and most complex ES’s.
Focus on internal operations of an organization, integrate functional and cross functional (intracompany) business processes.
Typical ERP systems include
Operations (production)
Human resources
Finance and Accounting
Sales and Distribution
Procurement

16. Management of intercompany processes: SCM and SRM
SCM connects the companies that supply the materials it needs to make its products.
SCM help companies plan for their production demand requirements and optimize complex transportation and logistics for materials.
SRM systems manage the overal relationships with the material suppliers.
SRM systems contain functonality to manage the quotation and contracts processes.

17. CRM and PLM
CRM systems connect a company’s ERP system to those of its customers.
CRM systems provide companies with capabilities to manage marketing, sales and service for its customers.
PLM systems help companies administer the process of research, design and product management.

18. The application suite Example: SAP, Oracle
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19. SAP ERP Solution Map
Shared Service Delivery
SAP NetWeaver
End-User Service Delivery
Analytics
Financial Analytics
Operations Analytics
Workforce Analytics
Financials
Financial Supply Chain Management
Treasury
Financial Accounting
Management Accounting
Corporate Governance
Human Capital Management
Talent Management
Workforce Process Management
Workforce Deployment
Procurement and Logistics Execution
Procurement
Inventory and Warehouse Management
Inbound and Outbound Logistics
Transportation Management
Product Development and Manufacturing
Production Planning
Manufacturing Execution
Product Development
Life-Cycle Data Management
Sales and Service
Sales Order Management
Aftermarket Sales and Service
Professional-Service Delivery
Corporate Services
Real Estate Management
Enterprise Asset Management
Project and Portfolio Management
Travel Management
Environment, Health, and Safety Compliance Mgmt.
Quality Management
Global Trade Services
Copyright SAP AG 2008
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20. SAP Supply Chain Management
SAP NetWeaver
Demand & Supply Planning
Demand Planning & Forecasting
Safety Stock Planning
Supply Network Planning
Distribution Planning
Service Parts Planning
Procurement
Strategic Sourcing
Purchase Order Processing
Invoicing
Manufacturing
Production Planning & Detailed Scheduling
Manufacturing Visibility & Execution & Collaboration
MRP based Detailed Scheduling
Warehousing
Inbound Processing & Receipt Confirmation
Outbound Processing
Cross Docking
Warehousing & Storage
Physical Inventory
Order Fulfillment
Sales Order Processing
Billing
Service Parts Order Fulfillment
Transportation
Freight Management
Planning & Dispatching
Rating & Billing & Settlement
Driver & Asset Management
Network Collaboration
Real World Awareness
Supply Chain Event Management
Auto ID / RFID and Sensor Integration
Supply Chain Visibility
Strategic Supply Chain Design
Supply Chain Analytics
Supply Chain Risk Management
Sales & Operations Planning
Supply Network Collaboration
Supplier Collaboration
Customer Collaboration
Outsourced Manufacturing
Supply Chain Management with Duet
Demand Planning in MS Excel
Copyright SAP AG 2008
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21. SAP Supplier Relationship Management
SAP NetWeaver
Purchasing Governance
Global Spend Analysis
Category Management
Compliance Management
Sourcing
Central Sourcing Hub
RFx / Auctioning
Bid Evaluation & Awarding
Contract Management
Legal Contract Repository
Contract Authoring
Contract Negotiation
Contract Execution
Contract Monitoring
Collaborative Procurement
Self-Service Procurement
Services Procurement
Direct / Plan-Driven Procurement
Catalog Content Management
Supplier Collaboration
Web-based Supplier Interaction
Direct Document Exchange
Supplier Network
Supply Base Management
Supplier Identification & Onboarding
Supplier Development & Performance Management
Supplier Portfolio Management
Copyright SAP AG 2008
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22. SAP Product Lifecycle Management
SAP NetWeaver
Product Management
Product Strategy and Planning
Product Portfolio Management
Innovation Management
Requirements Management
Market Launch Management
Product Development and Collaboration
Engineering, R&D Collaboration
Supplier Collaboration
Manufacturing Collaboration
Service and Maintenance Collaboration
Product Quality Management
Product Change Management
Product Data Management
Product Master and Structure Management
Specification and Recipe Management
Service and Maintenance Structure Management
Visualization and Publications
Configuration Management
PLM Foundation
Product Compliance
Product Intelligence
Product Costing
Tool and Workgroup Integration
Project and Resource Management
Document Management
Copyright SAP AG 2008
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23. SAP Customer Relationship Management
Web Channel
Interaction Center
Partner Channel Management
Trade Promotion Management
Business Communication Management
Marketing
Marketing Resource Management
Segmentation & List Management
Campaign Management
Real-Time Offer Management
Lead Management
Sales
Sales Planning & Forecasting
Sales Performance Management
Territory Management
Accounts & Contacts
Opportunity Management
Quotation & Order Management
Pricing & Contracts
Incentive & Commission Management
Time & Travel
Service
Service Order Management
Service Contract Management
Complaints & Returns
In-House Repair
Case Management
Installed Base Management
Warranty Management
Resource Planning
Copyright SAP AG 2008
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24. Other classifications of ERP systems
Today’s global comanies typically have an ES lanscape that includes custom and packaged applications from several vendors
Best of Breed Applications: Isolated to one process or part of a process that evolves from departmental applications
Ex: i2 is a popular SCM system. Ariba is a popular procurement system.
Niche applications: Small and independent software vendors offer highly specialized niche app’s.
Ex: Vendova is a small ISV that produces a pricing management tool to assist retailers in maximizing profit for retail sales. It pulls product and price info from several ES’s.
Other classifications:
Size of enterprise: SAP and Oracle for companies with more than 1000 employees
Method of delivery: Install the hardware and software in the facility (three-tier or SOA configurations) versus salesforce.com and Netsuite deliver ES entirely from web.
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25. Types of Data in ES Organizational Data Master Data Transaction Data
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26. Organizational Data
Define the organizational structure of the enterprise
Includes definitions of:
Companies (subsidiaries, etc.)
Divisions based on, product or geographical hierarchy
Sales organizations
Purchasing organizations
Physical facilities: plants, warehouses, distribution centers
HR organization: Functional areas, reporting relationships
Data rarely changes
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27. Master Data Define key entities in an organization Customers
Basic information: name, address, contact information
Financial information: payment terms, methods
Sales information: delivery terms
Vendors / suppliers
Similar information as customer
Products
Basic data: description, weight, color
Purchasing data
Sales data
Manufacturing data
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28. Master Data Employees Data changes occasionally Basic data
Personal data: dependents
Payroll data
Tax data
Data changes occasionally
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29. Transaction Data
Data that is the consequence of day-to-day transaction
Who, what, when, where, how, how much
Sales
Customer, products, quantities, dates and times, location (shipping, delivery), sales person
Purchase
Vendor, products, quantities, dates and times, location (delivery), sales person, requester
Production
Materials, quantities, facilities, resources (machine, people), dates and times, locations (storage, production)
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30. Super Skateboard Builders, Inc.
History
Product Line
Customers
Vendors
Plant Layout
Employees
Information Systems
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31. Standard Price (Manufacturing or Purchase Cost)
SSB, Inc. - Product List
Product Number
Product Description
Standard Price (Manufacturing or Purchase Cost)
Wholesale Price
MSRP
DXSB1000
Deluxe Skateboard
$58.00
$96.00
$160.00
STSB2000
Standard Skateboard
$40.00
$66.00
$110.00
ENSB3000
Entry-Level Skateboard
$34.00
$45.00
$75.00
HLMT5000
Helmet
$20.00
$27.00
SHRT4000
T-Shirt
$7.00
$10.00
$16.00
FAID6000
Skateboard First Aid Kit
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32. SSB, Inc. - Customer List Customer Number Name Address City State Zip1
World Wide Skateboard Distributors
1229 Main Street
AnN arbor MI
48109 2
Extreme Skateboard Sports, Inc.
5000 Rensellear Ave
Detroit
48202 3
"Waldo" Autry
3012 Haslett Road
Lansing
48906 4
Sporting Goods, Inc.
th Street
Grand rapids
49508 5
Flying Acrobats, Inc.
274 Adams Street
Holland
49423 6
MI Sporting Company
3000 Alpine Ave
49544 7
Dawgs
4005 State Street SE
saginaw
48710
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33. SSB, Inc. - Vendor List Vendor Number Vendor Name City State Zip
Materials Supplied
100000
Nutcase Supplies
Grand Rapids MI
49525
Nuts, bolts
100001
Skatelubbers, Inc.
First aid kit, t-shirt, helmet
100002
Grand Skateboard Supplies
Trucks, riser pads, grip tape, decks, Entry level skateboard, First aid kit
100003
Black Widow Skateboards, Inc.
Holland
49424
Entry level skateboard, First aid kit, t-shirt, helmet
100004
Spotted Owl Lumber
Cascade
49546
Maple ply, Entry level skateboard
100005
Van Go Paint Supplies
Kentwood
49508
sealers, paints
100006
The Dutch Monster
49504
Boxes, labels, glue
100007
Whitewater Development Company
jonesboro AR
72401
Building space
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34. SSB, Inc. - Plant Layout
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35. SSB, Inc. - Organizational Chart
John Z. Boeve (President)
Catherine VanderBos (Plant Manager)
Charles Skivers (Shop Floor)
Mark McKendry (Shop Floor)
Patrick Stevens (Sales Manager)
Shana Smith (Accountant)
David Bloomberg (Warehouse Manager)
Tom Jones (Warehouse)
Martha Seward (Purchasing Manager)
Maria Rivera (Office Manager)
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36. SAP Overview
Copyright SAP AG 2008
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37. Physical Flow What is the trigger? What are the steps?
What is the purpose of each step?
Who is involved in each step?
How is communication and coordination accomplished
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38. Procurement Process: Physical Flow
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39. Document flow Purchase Requisition Purchase Order Packing List
Goods Receipt Document
Vendor Invoice and Payment
Key questions regarding documents
What is the purpose?
What are the key data?
General: Who, when, what, where
Process / step specific: varies
How does data change across the process?
Who is responsible for the data?
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40. Purchase Requisition
Filled later by the purchasing department, based on the purchase order form.
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41. Purchase Order
Materials may be shipped via ground shipment (trucs, etc.), air, train, sea.
Free-on-board (F.O.B ) point is the point at which ownership of the shipped material legally transfers from one company to the other. F.O.B. Point is either the shipping point or the destination.
Payment Terms define how the company will pay the vendor.
Net nn: nn specifies the number of days within which payment for the full amount of the invoice is due.
x% mm/Net nn: x% discount is made if the payment is made within mm days; otherwise, full payment should be made within nn days.
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42. Packing List
When the vendor sends the shipment, a packing list or delivery document will accompany it, showing the details about the materials in the shipment.
It does not include pricing information.
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43. A Goods Receipt Document
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44. A Vendor Invoice
Once the shipment is sent, the vendor will send an invoice, or bill for the material shipped to the accounting department for payment.
Three-way match: The corresponding purchase order document, goods receipt document and invoice are matched.
If the match is OK, the payment is made by check or Electronic funds transfer (EFT)
Note of the Accounting Manager after the payment is made:
Paid in full
Check # 25846
8/1/08
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45. Information Flow Instance-Level Information Process-Level Information
Status of a purchase requisition / order
Has a requisition been acted on? Has a PO been created and sent
Have goods been received for the requisition / order? When? Where are the goods?
If received, has an invoice been received? Paid?
If not received, when can we expect the goods?
Ex: David wants to know the state of the purchase requisition he sent to Martha
Process-Level Information
How well is the process doing?
How much time does it take on average? Per material? Per vendor?
Which vendors are prompt? Who habitually delivers late?
What do we buy most often? From with vendor(s)?
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46. Financial Impact Impact on balance sheet and income statement accounts
Example: Procure $500 in materials.
Process step
B/S
I/S
Purchase requisition
Purchase order
Goods receipt
Vendor Invoice receipt
Vendor payment
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47. Role of enterprise systems in the procurement process
Execute the Process
Create Purchase Requisition
Create Purchase Order
Receive Shipment
Receive Invoice and Send Payment
Capture and Store Process Data
Monitor the Process
Instance-Level Information Flow
Process-Level Information Flow
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48. Enterprise systems in Procurement
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49. Purchase Requisition in SAP
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50. Purchase Order in SAP
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51. Goods Receipt in SAP
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52. Invoice Receipt in SAP
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53. Vendor Payment in SAP – Initial Screen
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54. Vendor Payment in SAP – Processing
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55. Process monitoring (Information flow)
Instance level – status information
Status of a purchase requisition / order (PO history)
Process level – aggregate information
How is the process doing?
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56. Purchase Requisition History
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57. Purchase Order History
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58. Process-Level Information
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59. Exercise Using Simulated SAP
The exercises will require you to complete the steps in the procurement process that have been discussed in this chapter. In particular you will:
Create a purchase requisition for a number of trading goods
Convert the requisition to a purchase order
Enter a goods receipt into the system
Enter a vendor invoice into the system
Record a payment to the vendor
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