1. Chapter 2 – Enterprise Systems
Accounting Information Systems 7e
Ulric J. Gelinas and Richard Dull
Copyright © 2008 Thomson Southwestern, a part of The Thomson Corporation. Thomson, the Star logo, and South-Western are trademarks used herein under license.

2. Learning Objectives Describe enterprise systems
Describe enterprise resources planning (ERP) systems
Explain the organization value chain
Describe the relationship of the organization value chain and an enterprise system
Illustrate the value of systems integration
Describe how an enterprise system supports major business event processes
Enumerate the pros and cons of implementing enterprise systems

3. ERP Systems Vendors

4. SAP Modules

5. Third-Party Modules
Customer Relationship Management (CRM)—builds and maintains customer related data
Customer Self-Service (CSS)—allows customers to complete tasks without assistance
Sales Force Automation (SFA)—automates sales tasks such as order processing and tracking

6. Third-Party Modules, Cont’d.
Supply Chain Management (SCM)—plans and executes demand planning, inventory acquisition, manufacturing, distributing and selling
Product Lifecycle Management (PLM)—manages product data from design through disposal of product
Supplier Relationship Management (SRM) —manages the interactions with the organizations that supply the goods and services to an enterprise. Includes procurement and contract management.

7. Enterprise Systems Value Chain
Enterprise systems facilitate value chain management
The value chain is the system of activities that transform inputs into outputs valued by the customer
The goal of an organization is to add the greatest value with the lowest costs thereby increasing competitive advantage

8. Value Chain and System

9. The Value of Systems Integration
One of the values provided by an enterprise system is the coordination of value activities in the value chain.
The system performs this coordination by sharing data across business processes.
In the following slides we describe what life would be like without integrated systems and then how enterprise systems solve some of those problems.

10. Inefficient Customer Service
1. Check if the customer exists in the system and has good credit.

11. Inefficient Customer Service
2. Find out if good can be promised from warehouse stock or if it has to be scheduled for manufacturing. Tell the customer when they would receive
the item. The date is known as “available to promise” or ATP.

12. Inefficient Customer Service
3. If item is not on the shelf, when will it be released
from manufacturing? Sally could review production schedules and add the time required to pick, pack, and ship the item. This would not, however, tell her if the item
had already been allocated to another customer.

13. Inefficient Customer Service
4. In the event that the item must be manufactured, when could it be scheduled, and how long will the manufacturing process take?

14. Inefficient Customer Service
5. How long will it take vendors to supply raw materials so that manufacturing can take place?

15. Inefficient Customer Service
6. What price will be charged to this customer for this order?
The price to charge must be obtained from marketing.

16. Inefficient Customer Service
7. Needs to check AR balance to determine if customer has sufficient credit.
Without direct access to the open AR data, Sally will
have to call accounting to approve this order.

17. Inefficient Customer Service
8. If credit is insufficient, must check with credit department for change in credit line.

18. Inefficient Customer Service
Do you think that Sally wants to keep the customer on the phone throughout this process?
Would you consider this to be good customer service?

19. Solution to Inefficient Customer Service
Enterprise system establishes available to promise (ATP) by checking warehouses and scheduled manufacturing
Price and creditworthiness automatically determined from database

20. Enterprise Systems Store Data in Tables

21. Processing Orders Requires Multiple Tables

22. Stored Data Used for Decisions

23. Major ERP Modules Sales and Distribution Records customer orders
Shipping
Billing
Connections to
Materials management module
Financial accounting module
Controlling module
Based on SAP (best selling ERP)

24. Major ERP Modules, Cont’d.
Materials Management
Acquisition and management of goods from vendors
Purchase order preparation
Receiving
Recording invoice
Interacts with
Sales and distribution module
Financial accounting module
Controlling module

25. Major ERP Modules, Cont’d.
Financial Accounting
Plays a central role in an ERP system and incorporates data from other modules into general ledger accounts and financial statements
Business events from other modules, such as SD and MM, are incorporated by the FI module into the general ledger accounts and included in the external account statements, the balance sheet, profit and loss statement, and statement of cash flows.
The FI module also includes accounts receivable and accounts payable functions to record and manage that data directly and to complete events begun in the SD and MM modules.

26. Major ERP Modules, Cont’d.
Controlling and Profitability Analysis
Handles internal accounting including:
Cost center accounting
Profitability analysis for sales
Activity-based accounting
Budgeting

27. Major ERP Modules, Cont’d.
Human Resources
Recruiting, management and administration of personnel
Payroll processing
Training and travel
Benefits
Reports

28. Order-to-Cash
1. Respond to customer inquiries and requests for quotes (RFQs).
Some companies add on separate CRM modules

29. Order-to-Cash
2. Record customer order including: check customer credit; check inventory pricing; and check where and when inventory will be available to send to the customer.
Triggers picking of goods or purchase of goods from another vendor.

30. Order-to-Cash
3. Pick goods from warehouse and pack for shipment.

31. Order-to-Cash 4. Ship goods to the customer.
ERP system would choose the appropriate routing and carrier, record the cost of goods sold
and inventory reduction in the general ledger. Some ERP systems trigger the billing process when a shipment takes place.

32. Order-to-Cash 5. Billing the customer and recording the sale in AR.
ERP system ensures correct
quantities, prices, terms, addresses, etc. ERP system
can be used to analyze sales profitability by comparing product costs to selling
price.

33. Order-to-Cash 6. Receive and record payment.
Includes: recording cash receipts and updating cash
and accounts receivable.
ERP data can then be used to manage customer credit and invest available cash.

34. Purchase-to-Pay
1. Determine requirements, complete purchase requisition.
ERP system may automatically
generate the purchase requisition based on quantity on-
hand, quantity-on-order, and expected demand.

35. Purchase-to-Pay 2. Prepare and record purchase order.
An ERP system assists the buyer in identifying sources of supply for the
requested item, preparing RFQs to vendors, analyzing vendor quotes,
comparing vendor prices, terms, and past performance

36. Purchase-to-Pay 3. Receive and record goods.
Compare quantity ordered to quantity received.
The ERP routes goods to the function that requested them or directs them the warehouse for immediate sale. It also records vendor performance data.

37. Purchase-to-Pay
4. Receive vendor invoice, match with PO and receiving report; record payable.
If the three-way match fails, the enterprise system notifies the proper personnel to ensure timely reconciliation of differences.

38. Purchase-to-Pay
5. Prepare and record cash disbursement and update accounts.
An ERP
system uses vendor and AP data to
schedule payments in accordance with vendor terms and to receive discounts.