Concepts in Enterprise Resource Planning Chapter 3

Concepts in
Enterprise Resource
Planning
2nd Edition
Chapter 3
Marketing Information Systems and
the Sales Order Process
Fitter Snacker’s
• Fictitious case study
• Easy to play Monday morning quarterback but many,
many, many companies have had similar experiences
• Many, many companies have made similar transitions
after enough pain, suffering, and costs
• Many, many companies need to make this type of
transition – Opportunity!
• Keep in mind the scale of this company – 2 products
• More products=more complexity, it only gets worse!
Chapter Objectives
• Describe the chaos associated with an un-integrated sales process
• Could this keep a small company from becoming a mid-sized
company?
• Could this keep a mid-sized company from becoming a large
company?
• Could this make the difference between making money and
losing money?
• Discuss how integrated data sharing increases company-wide
efficiency
• Describe the benefits of CRM, a useful extension of ERP
Transactional Data
• What is “transactional data”? Examples?
• Is integration of transactional data across functional
areas important?
Overview of Fitter Snacker
• What does Fitter Snacker make?
• What are the names of the products?
• How many sales divisions does Fitter Snacker have?
• What are these sales divisions and who do they each
sell to?
Overview of Fitter Snacker
• Both divisions offer terms of 2-10, net 30. What does
this term mean?
• Fitter Snacker also sells bars in store-brand wrappers for
some chains. What kind of challenges does this
present?
Problems with Fitter Snacker’s Sales Process
• How many different information systems does Fitter
Snacker operate and what do they each do?
• What information flows do we need between these
systems to conduct business?
Problems with Fitter Snacker’s Sales Process
• How does accounting get information regarding sales
transactions?
• How does sales get information from accounting
regarding credit?
• What happens with manual transactions and this type of
information flows?
Sales Process
Quotations
• What kind of problems does Fitter Snacker have with
their quotation process?
Sales Order
• Customers want delivery information when placing an
order. How do they estimate delivery time?
• How do sales clerks get information regarding credit?
• Does this information reflect recent purchases,
payments, or returns?
• How do integrated information systems solve this
problem?
Sales - Order Entry
• Stores customer order data for sales analysis
• Prints out packing labels for warehouse (twice a
day!)
• Produces the data to create invoices
• Provides data file for accounting department for
financial, tax and managerial accounting purposes
Order Filling
Whoops! Out of Stock
• What can they do when they accept an order and find out
that they are out of stock for part of the order?
• How difficult is it to decide on the best option?
• How many people needed to make the decision?
• How do integrated information systems solve this problem?
Important Customers
• Custom wrappers, custom display boxes
• What if I have enough product but it is not in the right
wrappers or not in the right display boxes?
• How do integrated information systems solve this
problem?
Invoicing
Invoicing
• How often does Accounting prepare invoices?
• What information do they need to do this?
• Does the customer receive the invoice with the
shipment?
• How do integrated information systems solve this
problem?
Payment
• What kinds of problems occur when processing
payments?
• How do integrated information systems solve this
problem?
Receiving Process
Returns
• What kind of challenges does Fitter Snacker have to
deal with when products are returned?
• What happens when the customer forgets to include the
RMA number?
• How do integrated information systems solve this
problem?
Payment and Returns
• What kind of problems are encountered if return credits
are not properly credited in a timely basis?
The Integrated Sales Process
Sales and Distribution in ERP
• There may be up to six events for a sales order
• Pre-sales activity
• Sales order processing
R/3
Client / Server
• Inventory Sourcing
• Delivery
• Billing
• Payment
SD
FI
MM
CO
PP
AM
QM
PS
PM
HR
IS
One
Integrated
Database
WF
Pre-Sales Activity
• What kind of pricing information is provided to customers?
• What checks the validity of discounts?
• How do the order entry clerks know the terms and
conditions of a particular quote?
Sales Order Processing
• With an integrated system, where does the data come
from when creating an order?
• What steps make up this process?
Inventory Sourcing
• With an integrated system, how do we know if we have
what we need to fill the order?
• In addition to what we have in stock today, what else do
we know with an integrated system?
• If a big order comes in, what can we trigger with an
integrated system?
Delivery
• What does “Delivery” mean in an SAP system?
Billing
• With an integrated system, where does the information
for the invoice come from?
• With an integrated system, what happens automatically
in accounts receivable?
Payment
• When a payment is received, how quickly is this
reflected in the customer’s credit for order entry?
Taking an order in SAP’s R/3
• To enter a sales order in SAP’s R/3, the sales order clerk
must identify the customer and material ordered to the
system
• SAP identifies customers and materials via a unique
number
• Search functions allow the sales order clerk to find a
customer or material number easily
Taking an order in SAP’s R/3
Sold-to party: Where the
customer’s identification
number is entered
P.O. Number: The
number assigned
by the customer to this
sales order
Req. deliv. date: The date
when the customer would
like to receive the order
Material and Order
quantity: What the
customer is ordering
Figure 3-2 SAP R/3 order entry screen
Customer Search
Clicking on
Sold-to party
field produces a
search icon.
Clicking on the
search icon
calls up a
search window
with numerous
search options
Figure 3-5 Search screen for customers
Customer Search Results
Figure 3-6 Results of customer search
Sales Order Data
• What is “Master Data” and what parts of the order are
comprised of “Master Data”?
• What does the “Organizational Structure” allow us to do?
• What are our “Distribution Channels”?
• Does pricing vary based on any of this?
Complete Order Screen
Figure 3-7 Order screen with complete data
Inventory Sourcing
• What is “Inventory Sourcing”?
• Do I really care what is in the warehouse now or do I
need to know what will be in the warehouse on the
shipping date?
• What will make inventory go up or down between now
and then?
• What does ATP let me do?
Order Proposals
Three options proposed
by SAP R/3
Figure 3-8 Order proposals
Document Numbers
• Assume each of your orders is assigned a unique order number
• What is a customer’s “Purchase Order Number” and why do I care
to keep track of this?
Audit Trail &Document Numbers
•
From the initial price quote to the processing of the check by accounts
receivable, how do we keep track of who has done what in each step of the
process?
•
What are “documents”?
•
What is “document flow”?
Document Flow
Accounting
Document
90000002 is
linked to sales
order 5
Figure 3-9 The Document Flow tool, which links sales order documents
Pricing
• Do I offer identical pricing regardless of items ordered,
size of order, or customer placing the order?
• What is “condition technique”?
Pricing
Net price for
order, including
discounts
Base price is
$240/case
The production
cost of the 10
cases is $1,992
Discount is 10
percent
Figure 3-10 Pricing conditions for sales order
Price Discounts
If a line in
the order is
over $1000,
the discount
is 5 percent
If a line in
the order is
over $1500,
the discount
is 10 percent
Figure 3-11 West Hills Athletic Club price discount
Integration of Sales and Accounting
• With an integrated system, do we need to:
• Notify accounting of sales via FTP?
• Notify the warehouse of sales via printed shipping
documents?
• Let accounting know about partial shipments before
they create invoices?
• Worry about sales over extending credit or not
accepting a sale due to old credit information?
Accounting Detail
Accounting
document
90000002,
accessible
from the
document
flow screen
Accounts
affected by
the sales
order
Figure 3-12 Accounting detail for the West Hills sales order
Customer Relationship Management
• CRM helps a company streamline interactions with customers
and make them consistent
• Goal is to provide a “single face to the customer”
• Any employee in contact with a customer should have access to
all information on past interactions
• Information about a customer should reside in the CRM system,
not with the employee
• CRM also provides a company with tools to analyze the vast
quantities of sales data available from the ERP system
Core CRM Activities
• What is “One-to-One Marketing”?
• What is “Sales Force Automation (SFA)”?
• What is “Sales Campaign Management”?
Core CRM Activities
• What are “Marketing Encyclopedias”?
• What is “Call Center Automation”?
SAP’s CRM Software
• SAP R/3 contains some primative CRM functionality:
• Contact management tool:
• Database of customer contact information
• Sales activity manager:
• Supports a strategic and organized approach to
sales activity planning
• Helps ensure follow-up activities are accomplished
Contact Manager
Figure 3-13 SAP R/3 contact manager
Sales Activity Manager
Figure 3-14 SAP R/3 sales activity manager
mySAP CRM
• A separate CRM system has the advantage of not interfering with the
performance of the ERP system
• The SAP R/3 system provides the raw data for CRM
• R/3 and CRM can also interact with:
• Business Warehouse (BW):
• Flexible system for reporting and analysis of data
• Advanced Planner and Optimizer (APO):
• System to support flexible planning of the supply chain
• Provides improved customer service with Global ATP
mySAP
CRM
System
SAP R/3
ERP
System
BW
Business
Warehouse
module
APO
Advanced
Planner &
Optimizer
module
Figure 3-15 SAP CRM system landscape
mySAP CRM
• SAP’s CRM manages three basic task areas:
• Marketing
• Sales
• Service
Cultivating a Customer Relationship
• Prospecting
• Acquiring
• Servicing
• Retention
Marketing and Campaign Planning
• Companies spend significant sums on marketing campaigns
• Successful planning, execution and evaluation are
necessary to achieve the maximum benefit
• mySAP CRM supports:
• Marketing and Campaign Planning
• Target Group Selection
• Campaign Execution Activity Management
• Campaign Analysis
Marketing and Campaign Planning
Target Group Selection
•Modeling
•Segment creation
•Selection
•Planning
•Budgeting
•Monitoring
Phone
Web
Mobile e-mail
BW
Campaign Execution
Activity Management
• Success
Measurement
• 3rd Party Data
• Profiles
Figure 3-15 Marketing and campaign planning
Execution
Campaign Analysis
Planning
Marketing and Campaign
Planning
Benefits of CRM
• Lower costs:
• Higher revenue:
• Improved strategy and performance measurement:
Top Line Versus Bottom Line
Where do CRM Systems add value?
Another Look: CRM Success and Failure
• CRM is often incorrectly viewed as a technology
implementation driven by the IT department
• CRM should be viewed as a business strategy
• CRM tools can help identify the most profitable
customers
Give Me 3 Examples
•
Fitter Snacker’s un-integrated information systems are
at the root of an inefficient and costly sales order
process. Because information is not shared in real-time,
customers are asked to repeat initial sales order
information. As an order is processed, errors in pricing,
credit checks, and invoicing also occur, presenting a
poor company image to customers. Integrated ERP
software would let FS avoid errors because all customer
data are stored in a central database that is shared in
real-time by all company employees.
Give Me 3 Examples
•
An ERP system such as SAP’s R/3 sees a sale as a
cycle of related functions, including taking orders,
setting prices, checking product availability, checking
the customer’s credit line, arranging for delivery, billing
the customer, and collecting payment. In R/3 all these
transactions, or documents, are electronically linked, so
tracking an order’s status (partial shipments, returns,
partial payments, and so forth) is easily accomplished.
Give Me 3 Examples
•
•
When an ERP system is installed, various configuration
decisions are made. These decisions reflect
management’s desires of how transactions should be
recorded and later used for decision-making. For
example, the system can be configured to limit selling
price discounts, thus avoiding unprofitable pricing.
An ERP system’s central database has master data
tables for customers, suppliers, and inventory. The
tables hold relatively permanent information about each
subject.
Give Me 3 Examples
•
Customer Relationship Management (CRM) systems
build on the organizational value ERP provides; it
specifically increases the flexibility of the company’s
common database in regards to customer service.
Various kinds of CRM software are available, some
from ERP vendors (including SAP) and some from thirdparty software companies. CRM software can lead to
operational savings, but most companies buy it because
they feel that having better customer relationships will
result in higher revenues. Uses of CRM have evolved
since the software was initially launched, beginning as a
customer contact repository to extending its capabilities
to sophisticated business intelligence.